ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By T T Ram Mohan

Bank Privatisation Is Not Easily Accomplished

Those who urge the wholesale privatisation of public sector banks do not seem to have given adequate thought to the mechanics of bank privatisation in India. Given the present regulatory regime for private bank ownership in India, there are formidable obstacles to privatising even what is regarded as an obvious candidate for privatisation—the IDBI Bank. The challenges in privatising several PSBs must not be understated.

RBI Moves to Shake Up Governance at Banks

The Reserve Bank of India’s discussion paper on “Governance in Commercial Banks in India” is refreshing in that it takes an approach to governance that is ownership-neutral. This shows a recognition that there are governance issues at private banks, not just at public sector banks. The significant proposal is distancing of four key functions at banks from the chief executive officer. The RBI may benefit from incorporating radical proposals made in other places such as the United Kingdom.

Reining in Bankers’ Pay

The Reserve Bank of India’s guidelines on compensation for top management of banks are more generous in respect of variable pay than those of the European Union. However, they are a step forward in that they address an important lacuna in the existing guidelines: the non-inclusion of stock options in variable pay. The guidelines should serve to set a cap on the total compensation payable to bankers. As important are the disclosures in respect of top management compensation that the guidelines mandate.