Home >Opinion >How public sector bank CEOs are selected

The Banks Board Bureau has recommended five executive directors of public sector banks for top posts in state-run banks which will fall vacant in coming months. They are Sunil Mehta of Corporation Bank, Dina Bandhu Mohapatra of Canara Bank, Rajkiran Rai of Oriental Bank of Commerce, R.A. Sankara Narayanan of Bank of India and R. Subramaniakumar of Indian Overseas Bank.

Within hours of selection, the Bureau put up the names on its website—probably to bring in transparency and ward off any pressure from any quarter to change the names later. In the past, there has been at least one instance where the Bureau’s recommendation was not accepted by the government, the majority owner of these banks.

The selection process of these five gentlemen also marks a departure from the past. This is for the first time the so-called assessment centre exercises were conducted to select the CEOs of India’s public sector banks. Assessment centre is a catch-all term which refers to a standardized evaluation of behaviour, based on multiple evaluations, including job-related simulations, interviews, and psychological tests. An assessment centre is defined as “a variety of testing techniques designed to allow candidates to demonstrate, under standardized conditions, the skills and abilities that are most essential for success in a given job".

ALSO READ | A paper tiger called Banks Board Bureau

One critical component of this is psychometric tests—a standard and scientific method to measure individuals’ mental capabilities and behavioural style. Such a test helps identify the hidden aspects of candidates that are difficult to extract from a face-to-face interview. The Bureau sought the assistance of Egon Zehnder, a global executive search, talent strategy and leadership development firm, to conduct such tests.

Do these five candidates have great leadership qualities? I don’t know about that, but they seem to be the best in the talent pool from which the Bureau had to select the prospective CEOs. Unlike in the past, when the government invited applications from the private sector for the top jobs in state-run banks, this time around the selection was done from among the talent available within the industry.

In 2015, two large public sector banks got CEOs from the private sector—P.S. Jayakumar (Bank of Baroda) and Rakesh Sharma (Canara Bank). A former Citibanker, Jayakumar was heading VBHC Value Homes Pvt. Ltd as managing director and CEO while Sharma was running Lakshmi Vilas Bank. Unlike Jayakumar who had worked in the private sector throughout his career, Sharma had spent three decades with the State Bank of India (SBI) before his 18-month stint in the old private bank. The government is still watching the experiment of managing a state-run bank with a private sector executive before opening the doors for more.

Indeed, the selection process of the five CEOs is innovative, but no less interesting is the act of swapping the top jobs of two banks last month. The Bureau was not involved in that exercise as its mandate is selection of the CEOs of public sector banks and it doesn’t have a say in lateral entries. The government swapped the top posts of IDBI Bank Ltd and Indian Bank. Kishor Piraji Kharat, the CEO and MD of IDBI Bank since 18 August 2015, has been made the boss of Indian Bank and Mahesh Kumar Jain, MD and CEO of the Chennai-headquartered bank since 2 November 2015, is now heading the Mumbai-based IDBI Bank.

Why has this been done? There have been various theories doing the rounds. Many believe that the Reserve Bank of India (RBI) is instrumental in doing this. This is probably not correct. I understand that the banking regulator expressed concerns about the health of IDBI Bank and wanted the government to strengthen its management bandwidth but did not recommend shifting its CEO to another bank.

Yet another theory is Jain has been rewarded for its brilliant performance in Indian Bank and Kharat had to go as he had not managed IDBI Bank well. This is also difficult to believe as neither the top post in IDBI Bank can be a reward for a performer and nor the CEO’s job in Indian Bank is a punishment for a non-performer.

IDBI Bank is a much larger bank than Indian Bank, but it’s sick. Indian Bank is roughly half the size of IDBI Bank in terms of assets but in the first three quarters of fiscal year 2017 it recorded a net profit of Rs1,086 crore against a Rs1,958 crore loss by IDBI Bank. It is better capitalised (13.89% capital adequacy ratio) than IDBI Bank (11.29%) and has far less bad assets (4.76% net bad loans and 7.69% gross bad loans) than IDBI Bank (9.61% and 15.16%, respectively). Bad loans of IDBI Bank have doubled since September 2015 when the RBI put in place the so-called asset quality review and its overall stressed assets are more than one-fourth of the loan book.

Of course, Jain can take up his new assignment as the biggest challenge in his career and if he turns around the bank, that will be an achievement. Since Indian Bank is in a far better shape than IDBI Bank on every count, its top job can never be a punishment for any professional.

Most importantly, if one is not found suitable to manage one particular bank, should the person be given another bank to run—or should she be asked to hang up her boots? Clearly, there is something else behind this development which we do not know. Incidentally, the government took extra care in the appointments of CEOs at five big banks, IDBI Bank being one of them. In 2015 (the Bureau didn’t exist at that time), the government invited applications from the private sector to fill in the top posts at these banks—Bank of Baroda, Canara Bank, Bank of India, Punjab National Bank and IDBI Bank.

Jayakumar was picked for Bank of Baroda; Sharma for Canara Bank; Melwyn Rego, deputy managing director of IDBI Bank, for Bank of India; Usha Ananthasubramanian, chairman and MD of Bharatiya Mahila Bank (this has been merged with SBI) for Punjab National Bank; and Kharat, an executive director of Union Bank of India, for IDBI Bank.

Kharat had spent only five months as an ED of Union Bank, but in his previous 37 years with Bank of Baroda, he had held several positions in India and overseas, including setting up and heading the bank’s subsidiary in Trinidad and Tobago.

The government had appointed global management consulting firm Hay Group (which was acquired by Korn Ferry in end 2015), to identify the candidates for the top jobs in these five banks. Ironically, Jain who has now been called to steer IDBI Bank out of the mess, had applied for the top job at one of these banks at that time but could not make it.

Tamal Bandyopadhyay, consulting editor at Mint, is adviser to Bandhan Bank. He is also the author of A Bank for the Buck, Sahara: The Untold Story and Bandhan: The Making of a Bank.

His Twitter handle is @tamalbandyo.

Respond to this column at

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout