Govt announces sweeping governance reforms for PSU bank boards2 min read . Updated: 30 Aug 2019, 05:14 PM IST
- Public sector banks enabled to do succession planning; non-official directors to perform role analogous to independent directors
- Bank boards given flexibility to fix sitting fee of independent directors
The government on Friday announced the merger of Punjab National Bank, Oriental Bank of Commerce and United Bank of India to create the second-largest banking network in the country with 11,431 branches.
"Punjab National Bank, Oriental Bank of Commerce and United Bank will be brought together and they shall form the second largest public sector bank with the business of ₹17.95 lakh crore and 11,437 branches," Finance Minister Nirmala Sitharaman said at a press conference here.
Canara Bank and Syndicate Bank will be merged into one entity to create fourth largest public sector bank with ₹15.2 lakh crore business, while Union Bank of India, Andhra Bank and Corporation Bank will be amalgamated into a single entity to become India's 5th largest public sector bank with ₹14.59 lakh crore business.
Similarly, Indian Bank and Allahabad Bank will become one entity to create seventh largest public sector bank with ₹8.08 lakh crore business.
The Finance Minister further said that the Bank of India and Central Bank of India would remain independent.
After the amalgamation, only 12 PSBs will be left in India from the 27 earlier.
Nirmala said the creation of next-generation banks was imperative for India to become a $5 trillion economy in the next five years.
Public sector banks enabled to do succession planning, said Sitharaman while unveiling governance reforms in PSBs.
Finance Secretary Rajeev Kumar tweeted about the various governance reforms for PSU banks to achieve the $5 trillion economy.
- To make management accountable to Board, Board committee of nationalized banks to approve performance of GM and above (including MD)
- To make span of control manageable in large PSB, post consolidation, Boards given flexibility to introduce CGM level as per business needs
- To recruit Chief Risk Officer from market, at market-linked compensation to attract best available talent
- To enable succession planning, Board to decide system of 'Individual Development Plans' for all senior executive positions
- To ensure sufficient tenure, Boards given flexibility to prescribe residual service of two years for appointment of GM and above
- Flexibility given to Boards of large PSBs to enhance sitting fees of non-official directors (NODs)
- For better Board commiitee functioning, Boards given mandate to reduce/rationalize Board committees
- Risk Management Committee given mandate to fix accountability for compliance of Risk Appetite Framework
- Longer term to directors on Management Committee of Board to enable them to contribute effectively
- MCB loan sanction thresholds enhanced by up to 100%, to enable focussed attention to higher value loan proposals
- Boards given mandate for training of directors, both for induction and for specialized purposes
- Boards given mandate to evaluate NOD performance annually on peer-review basis
- Executive Directors' strength in larger banks raised to four, for better functional focus and thrust on technology