........Earlier, his predecessor, D.K. Mittal, had made a virtue of issuing detailed directions to state-owned banks on operational matters such as capping bulk deposits at 10% of the total deposits. So specific were the letters that even the Reserve Bank of India (RBI) was, for a change, offended and decided to speak out. There are two issues involved here. First, such interventions are a clear violation of the basic principle of corporate governance: the separation of ownership and management. Even if the government of India, represented by the finance ministry is the largest shareholder, it cannot get into the operational management of banks. What is being done through these periodic outbursts is to muscle in and micromanage public sector banks. Not only does this violate corporate governance, it weakens the authority of RBI as the regulator...........
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Of banks and Bureaucrats
A brilliant analyses by Dr. Haseeb Drabhu, who is not only a renowned economist and columnist but himself an astute banker of high repute having led the JK Bank to newer heights.
As rightly observed by Dr. Drabhu, banker bashing has become a fashion with the mandarins of Ministry of Finance, particularly the department of financial services (earlier Banking Department). One wonders whether Secretary level officials should ride a rough shod over sufficiently senior bankers, CMDs/EDs who themselves are supposed to be at par with Additional Secretaries level. These poor chaps never ever contradict or respond to the uncalled for criticism of their style of functioning. May be they look forward for some post-retirement positions from the Government and in their vain hope continue to bear the insult. In this regard I am reminded of an old story. It goes like this”
“ In a village a washer-man was having a Dog and a Donkey. As usual, the dog would receive all the love of the washer-man and his family whereas the poor donkey would get all the flak and beating from the washer-man despite having carried load of clothes daily. One day the dog asked the donkey “ why do you continue to remain with this cruel washer-man despite all his beatings and why don’t you leave him for some good and gentle man.”? The donkey replied, ”I know yaar,…. but I have a very bright future here with the washer man”. Dog was surprised and asked “what was that bright future you have here with the washer man” Donkey looked around and replied , “whenever, the washer man scolds his young daughter, he says that he will marry her with his Donkey”. And I am waiting for that fateful day.”
Once having been the CMDs of these banks, these officials should be debarred from seeking any officials position including directorship on corporate companies. Then only they will work fearlessly and judiciously for the betterment of the banks they head. In this connection, a pertinent question arises - why banks in the private sector have been doing generally better than their counterparts in public sector with the same set of Regulatory and supervisory prescriptions from RBI. According to me the difference lies obviously in the manner of ownership. While the private sector banks are answerable to the shareholders, who do not interfere in day to day management of the banks, whereas in public sector banks (though almost all of them have limited public share holdings), the Government being the major shareholder, its officials try to meddle in the micromanagement of these banks to boss over them and the top management of these public (sarkari) banks do not have freedom and independence of taking decisions. Therefore, the fault for poor show of PSBs likes in the backyard of the major share holder i.e the Government .It should first set its own house in order and leave the public sector banks take their own decisions. After all, how long the major share holder would continue to undermine the interests of the minority share holders and time has come when-" sarkari banko mein sarkari dakhalandazi band honi chahiye"
Manohar Mahajan
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