Strengthening Corporate Governance and HR Practices in Nationalised Banks

Strategic Insights -

The Indian government is planning to revamp corporate governance and human resource practices in nationalised banks, following a merger process that has resulted in four large banks being formed from 27 smaller ones. The move aims to professionalise board-level committees and introduce a robust performance management system for employees. This is a significant step towards improving the efficiency and effectiveness of these banks, which are now as large as State Bank of India, following the merger.

Key Takeaways:

  • Longer tenure for executive directors, up to 5 years, to ensure stability and continuity in leadership.
  • Hiring of specialists in areas such as NPA management, risk management, information technology, and human resource management to improve performance and efficiency.
  • Fast track promotion for high performers to encourage and retain talent within the banks.
  • Introduction of a robust performance management system to evaluate and improve employee performance.
  • Development of a leadership succession plan to identify and groom future leaders within the banks.
  • Maintenance of a database on the performance of officers, including postings, placements, promotions, and vigilance.
  • Identification of competencies and conduct of competency assessment of Scale V and Scale VI officers.
  • Institutionalisation of clean and smart banking practices through the Ease 4.0 programme.

Statistics:

  • 27 public sector banks were merged into 4 large ones in August 2019.
  • 12 public sector banks remain in the country after the merger.
  • PNB is the second-largest public sector bank after the merger.
  • The merger process resulted in banks as large as State Bank of India.
  • The Ease 4.0 programme was launched in January 2018.

Sources:

  • "Government considering measures to strengthen corporate governance, HR practices in nationalised banks" (Times of India, August 10, 2022).
  • "Banks Board Bureau to formulate long-term strategy for_psbs" (Business Standard, August 12, 2022).