Don’t Al­low Ca­coph­ony of Un­in­formed Voices to Weaken Bank­ing De­ci­sions: Rai

Banks Board chief says prob­lems are im­mense, but it’s not that banks haven’t faced them in past

The Economic Times - - Economy & Companies - Saloni.Shukla@ times­group.com

Pune: Banks Board Bureau chair­man Vinod Rai on Wed­nes­day said “ca­coph­ony of un­in­formed voices” should not be al­lowed to weaken the de­ci­sion-mak­ing skill of bankers.

“The bank­ing sec­tor has seen con­sid­er­able stress in re­cent years. How­ever, we should not al­low the ca­coph­ony of un­in­formed voices to de­bil­i­tate the de­ci­sion-mak­ing ca­pa­bil­ity of bank ex­ec­u­tives,” Rai, a for­mer Comptroller and Au­di­tor Gen­eral (CAG), said at the con­vo­ca­tion cer­e­mony of the Na­tional In­sti­tute of Bank Man­age­ment in Pune. “The prob­lems are im­mense, but it is not that we have not faced such prob­lems in the past.”

Rai said he sees the present time as a re­nais­sance mo­ment for In­dia as the country is gifted with ex­cel­lent macro-eco­nomic sta­bil­ity.

At a meet­ing with in­vestors in New York, Fi­nance Min­is­ter Arun Jait- ley had said In­dia could grow 8-8.5% in 2016-17, if fore­casts of nor­mal mon­soon proved cor­rect. The Eco­nomic Sur­vey has pro­jected In­dia’s eco­nomic growth to re­main within a range of 7-7.75% in 2016-17 against an es­ti­mated 7.6% growth in 2015-16.

Rai stressed the fact that all loan de­faults can­not be seen as cor­rupt. “Cau­tion and pru­dence in bank­ing ac­tiv­ity can hardly be overem­pha­sised,” he said. “How­ever, not all loan de­faults are wil­ful, and not all lend­ing ac­tiv­ity — even if it is to sal­vage such stressed ac­counts — can be branded as cor­rupt prac­tice or crim­i­nal mis­con­duct.”

He said one should re­frain from paint­ing a sit­u­a­tion as alarm­ing as it could lead to a back­lash and banks could be­come risk-averse, lead­ing to lend­ing freeze. Rai said it was mean­ing­less to de­bate ad-in­fini­tum on the es­capades of one or two in­dus­tri­al­ists. “We can­not al­low nor­mal loan ad­vanc­ing ac­tiv­ity to come to a stand­still based on the ex­pe­ri­ence of a few cases of mis­man­age­ment,” Rai said. “Th­ese bor­row­ers are in mi­nor­ity and can’t be­come the barom­e­ter of bank­ing de­ci­sion-mak­ing.”

High­light­ing the need to en­sure level-play­ing field in re­mu­ner­a­tion of PSU bank em­ploy­ees, Rai said the Banks Board Bureau will try to bring about a more prag­matic com- pen­sa­tion struc­ture.

“It is ac­knowl­edged that the pub­lic sec­tor has lim­i­ta­tions on the score of com­pen­sa­tion pack­age per se,” Rai said. “How­ever, an ad­e­quate re­ward struc­ture around ESOP, per­for­mance-linked in­cen­tives and other ben­e­fits can surely be de­signed to at­tract the best ta­lent to the pub­lic sec­tor.”

Banks Board Bureau Chair­man Vinod Rai (left) with RBI gov­er­nor Raghu­ram Ra­jan at the 12th con­vo­ca­tion of NIBM in Pune on Wed­nes­day

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