Govt Should Cut Holding in PSBs to Under 50%, says RBI Panel Report
‘Watchdog should’ve last word on regulating PSU banks’
The timing is impeccable. A day after the exit polls set the market on fire, a Reserve Bank of India (RBI) panel report has recommended that the government should divest its stake in state-owned banks to less than 50%, allow private equity houses to own 40% in distressed banks, and strip managers of private sector banks of their bonuses and Esops if they are caught ever-greening sticky loans. It has also said that RBI — and not the finance ministry — should have the last word on regulation of public sector banks which command 70% of the market share. “Boards (of PSU banks) are disempowered, and the selection process for directors is increasingly compromised,” said the report. The recommendations have the potential to transform Indian banks. The RBI-constituted committee is headed by PJ Nayak, the bureaucrat-turnedbanker who led Axis Bank for a decade.
The panel has proposed an age limit of 65 years for CEOs and wholetime directors of private sector banks. Once implemented, lenders like IndusInd Bank and HDFC Bank would have to identify successors for Romesh Sobti and Aditya Puri in the next two years.
Change in the Air
PJ Nayak The recommendations of the RBI panel have the potential to transform Indian banks allowed to own 40% in distressed banks ever-greening bad loans should be stripped of bonuses, Esops for CEOs and wholetime directors of pvt banks