Mission Indradhanush for Banks

A PLAN FOR REVAMP OF PUBLIC SECTOR BANKS

The post of chairman and MD in public sector banks to be split into :
MD and CEO
Non-Executive Chairman
This approach is based on global best practices
As per the guideline in the companies Act it will ensure appropriate checks and balances in day to day functioning of these banks .
The selection process for both these positions has been made more transparent and meritocratic
Under the new process of selection for MD &CEO , even private sector candidates were also allowed to apply for position of MD & CEO .

BBB ( Bank Board Bureau ) will be a body of eminent professionals and officials, which will replace the Appointments Board for appointment of Whole-time Directors as well as non-Executive Chairman of PSBs.
It is an autonomous body.
They will also constantly engage with the Board of Directors of all the PSBs to formulate appropriate sttjtegies for their growth and development.
Help banks develop differentiated strategies of capital raising plans to innovative financial methods and instruments
The bureau will have three ex-officio members and three expert members (of which two would necessarily be from the banking sector), in addition to the Chairman.
The Search Committee for members of the BBB comprise of the Governor, RBI and Secretary (FS) and Secretary (DoPT) as members
VinodRai, a former comptroller and auditor general is chairman.
Other members of the bank board bureau include
Anil K. Khandelwal, former chairman :nd managing director of Bank of Baroda,
N. Sinor, former joint managing director of ICICI Bank and
RupaKudwa, former managing director of rating agency Crisil,
The tenure of all the appointees will be two years.
The bureau will also have members from the government.

Although PSBs have been under stress, but they are still adequately capitalized and meeting all the Basel III and RBI norms.
Now, the Government of India has shown its intent to adequately capitalize all the PS banks to have a safe buffer over and above the minimum norms of Basel III during the next few years.
Out of total requirement the Government of India proposes to make available Rs 70,000 Cr. Out of budgetary allocation for four years as per the following table :

Allocation of Fund

The infrastructure sector and core sector have been the major recipient of PSBs' funding during the past decades.
But due to several factors, projects are increasingly stalled/stressed thus leading to NPA burden on banks.
In a recent review, problems causing stress in the power, steel and road sectors were examined

Delay in obtaining permits / approvals from various governmental and regulatory agencies,
land acquisition, delaying Commercial Operation Date (COD); lack of availability of fuel, both coal and gas; cancellation of coal blocks;
Closure of Iron Ore mines affecting project viability; lack of transmission capacity;
limited off-take of power by Discoms given their reducing purchasing capacity;
Funding gap faced by limited capacity of promoters to raise additional equity
Reluctance on part of banks to increase their exposure given the high leverage ratio; inability of banks to restructure projects even when found viable due to regulatory constraints.

Measures

Project Monitoring Group (Cab. Sectt.) / Respective Ministries will pursue with concerned agencies to facilitate issue of pending approval/permits expeditiously
Pending policy decisions to facilitate project implementation/operation would be taken up by respective Ministries/Departments.
Ministry of Coal/PNG will evolve policies to address long-term availability of fuel for thee projects.
Respective Discoms will be provided hand-holding towards enabling early reforms.
Promoters will be asked to bring in additional equity in an attempt to address the worsening leverage ratio of these projects.
Wherever the promoters are unable to meet this requirement, the Banks would consider viable options for substitution or taking over management control.
The decision to increase import duty on steel has already been taken.
RBI has been requested to consider the proposal of the Banks for granting further flexibility in restructuring of existing loans wherever the Banks find viability.

The Government has issued a circular that there will be no interference from Government and Banks are encouraged to take their decision independently keeping the commercial interest of tht organisation in mind.
The Government intends to provide greater flexibility in hiring manpower to Banks.
The Government is committed to provide required professionals to the Board so that well-informed and well-discussed decisions are taken.

The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations.
A clear distinction has been made between interference and intervention
A robust grievance redressal mechanism is being put in place for customers of banks as well as staff.

Governance Reforms

Conclusion

After Reading the above facts , we can forecast there are 2 Basic challenges infront of Banking Sector , these are as follows : -

Financial Challenges	Non - Financial Challenges
A. NPA (Non Performing Assets ) B. Financial Inclusion C. Capitalisation	A. Political Interference B. High attrition rate C. Vacant position at higher level