Bankers divided over RBI Guv's proposal to split CMD post

RBI Governor flagged off an important debate on the need to separate the roles of a board chairman from CEO for public sector banks. He said this will act as a check on the CEO. The Governor was probably moved by the regularity with which banks see severe profit declines when their CMDs retire. CNBC-TV18's Gopika Gopakumar and Supraja Srinivasan report. Governor Subbarao recommended the need to split the posts of chairman and CEO of public sector banks. This has already been done for private sector banks and the Governor pointed out that after the 2008 global banking crisis, such a split of roles is being recommended globally. “The logic is that such a bifurcation of leadership of the board from the day to day running of the business will bring about more focus and vision as also the necessary thrust to the functioning of the top management of the bank. It will also provide effective checks and balances,” he said.  The suggestion evoked mixed response. Bankers hailed this suggestion, but said there would be challenges. “Considering that it will give a chairman of the board who will focus on strategy, vision and the MD will focus on the implementation... I think is a good observation by the governor,,, but one has to look at how exactly finally it turns out to be,” MV Nair CMD, Union Bank said. On the other hand, Naina Lal Kidwai, Group GM & Country Head, HSBC India points out, “The problem then becomes how do we access a pool of people who are capable of filling that role as chairman and are they going to put hands up to become chairman of PSU banks. Therein lies in the aspect of where does the pool exist. I don't think this pool exists. It's very difficult today for people who sit no other boards to come on board of bank.”  More critical area who will decide who will become chairman of PSU bank. What's the process of selection going to be? That again if it's murky and if it's not open and transparent that will system will go away. If you look at process followed in listed companies, role of nomination committee is key. Nomination committee puts it up to the board to choose. Don't think we can get there easily. Governor Subbarao said he will take up this issue with the government soon.

Moneycontrol