PMO rejects FinMin proposal on bank chief appointments

The Prime Minister’s Office (PMO) has turned down a finance ministry proposal to allow bankers with less than two years of residual service to be appointed as public sector bank chiefs.

The move will affect several candidates in race for top posts of banks
Sources close to the development said PMO was against dilution of appointment norms, which have been in place for several years and have coincided with the re-emergence of public sector banks as strong players in the banking space.

The sources said a term of less than two years did not give individuals time to implement their decisions properly.

Following the feedback from South Block, the finance ministry has prepared a fresh set of names and sent them to the Appointments Committee of Cabinet (ACC).

PMO’s objections come at a time when some lawmakers have written to Finance Minister Pranab Mukherjee expressing concerns over the proposal to allow executive directors with 18 months of residual service to be considered for appointment as bank chiefs. The members of Parliament said the decision was taken unilaterally by the finance ministry and ACC’s approval was not taken.

They said since 2007, the government had followed ad-hocism in appointment of bank chiefs and not followed a uniform set of rules. For the interviews conducted in February, the government kept changing norms, so much so that some candidates from State Bank of India, who were called for the meeting, were dropped at the last moment.

Interestingly, because of this intervention by PMO, a long tradition of appointment of chairmen of government banks has been broken. Traditionally, appointments at large banks are done through lateral movement, that is, the chairman of a smaller bank takes charge of a big bank. However, for Canara Bank’s top job, the government has decided to promote an existing executive director because present chairmen of smaller banks do not meet the two criterions, that is, two years of residual service and one-year experience as chairman of a smaller bank.

Union Bank’s S Raman is scheduled to take charge of Canara Bank when the present chief, A C Mahajan, retires in July. For six large banks, Punjab National, Bank of Baroda, Canara Bank, Bank of India, Union Bank of India and Central Bank of India, the system of lateral movement has been followed.

The sources said the finance ministry sought consent from eight candidates for appointment in as many number of banks where top positions would be vacant till February next year.

Apart from Canara Bank, the government has sought consent from candidates for appointment as chiefs of Corporation Bank, Andhra Bank, Indian Overseas Bank, Uco Bank, Oriental Bank of Commerce, Bank of Maharashtra and Vijaya Bank. Except for Vijaya Bank, where the post will be vacant in February, the top posts in seven other banks will be vacated in 2010.

The government has also sought consent from 11 general managers for the position of executive directors in nine banks