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
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