State-owned banks must revamp how employees are assessed: RBI deputy

Kolkata: India's state-owned banks need to revamp the process by which they determine employees' performance for better utilisation of talent, a deputy governor of the central bank said on Saturday.

"Currently, the PAS (performance appraisal system) makes no meaningful distinction between individuals for identifying or deploying talent, skill and/or specialisation; nor does it guide determining compensation," said Reserve Bank of India (RBI) Deputy Governor R Gandhi speaking at an industry event in Kolkata.

His comments come a week after Prime Minister Narendra Modi's government convened a two-day meeting of public sector bankers to suggest a roadmap for reforms.

More than two dozen state banks have been constrained by a pile of bad loans and governance issues, and political interference and union opposition have thwarted major reforms in the industry for years.

Gandhi said there was a need to look at the holding company structure for state own banks to improve financial stability and to reduce state's banks dependence on the government for capital adequacy needs.

Gandhi referred to the P J Nayak committee report released last year that suggested the formation of a “Bank Investment Company” to take control of the government's holding in state-owned banks.

However, he added there were "deeper ramifications" of the report's recommendations and the issue must be looked at "from multiple dimensions including that of the financial stability perspective."

He also asked for consideration of the recommendations by the Shyamala Gopinath committee, which in 2011 had suggested that all finance companies should be converted to a new "financial holding company (FHC)" to improve stability and oversight.