Mumbai: A day after India celebrated her 70th independence day, RBI governor Raghuram Rajan made a strong pitch for a larger role for banks boards and for senior bankers to put their names to the final loan decision even though committees may take the final decision.
Mr Rajan said the incentive structure for bankers should be worked out so that they evaluate, design, and monitor projects carefully, and get significant rewards if these work out.
In a marathon speech at the FICCI-IBA annual banking conference he said “This means that even while committees may take the final loan decision, some senior banker ought to put her name on the proposal, taking responsibility for recommending the loan.
“The IT systems within banks should be able to pull up overall performance records of loans recommended by individual bankers easily, and this should be an input into their promotion,” he said.
Mr Rajan also stressed the importance of freeing bank boards to determine their strategies. He said “Too much coaching by central authorities will lead to a sameness in public sector banks that successive Gyan Sangams have criticised.
Executive appointment decisions should devolve from the Bank Board Bureau (BBB) to the boards themselves, while the BBB should focus only on appointing directors to represent the government stake on the bank boards as it transforms into the Bank Investment Company (BIC), the custodian for the Government’s stake in banks.
Rajan feels he and bankers are underpaid to an extent
Expressing concern over the difficulties in getting the best talent for public sector banks, RBI governor Raghuram Rajan said one of the problems is that all public sector entities across the world tend to pay more than the private sector to lower level employees, and less than the private sector to higher level employees.
“I’m sure all of you feel underpaid,” he said to his audience of bankers attending the banking conference. “I too feel underpaid. (Rajan took home Rs 1,98,700 for the month of July 2016.) This makes it hard for them to attract top talent, but makes it easier to attract good people at lower levels.” He suggested that banks follow RBI’s compensation system to attract applicants.
