Government is likely to implement the proposal of bifurcating the post of Chairman and Managing Director in public sector banks from the next fiscal to strengthen corporate governance.
The Finance Ministry is “actively considering” the proposal of splitting the CMD post in state-owned banks and it could be implemented from the next fiscal, sources said.
For the selection of non-executive chairman, a panel could be formed headed by Reserve Bank Governor, they added.
Other members of the selection panel will include Financial Services Secretary and experts in the banking sector, they said.
In line with private sector banks, there would be Managing Director and CEO with non-executive chairman.
Earlier, bifurcation of the CMD’s post was also suggested by Reserve Bank to the Finance Ministry.
RBI had contented that CMDs of public sector banks enjoy absolute power along with boards.
The central bank had also said CMDs often dominate the board during their tenure and therefore it also recommended that the post of CMDs be separated to empower the board.
In PSBs, the top executive is designated as CMD, with the exception of the largest lender State Bank of India, where the top position is commanded by the Chairman and there are four Managing Directors with clearly defined executive roles under them.
The posts of Chairman and MD in the private sector are held separately.
RBI had set up a committee under the chairmanship of A S Ganguly in 2004-05 to study the issue of bifurcation of the post of Chairman and Managing Director in banks. The panel had recommended the bifurcation. Private sector banks in 2007 implemented this recommendations.
In August, Syndicate Bank CMD S K Jain was arrested for allegedly receiving a bribe of Rs 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries.
Besides, some officials of Oriental Bank of Commerce and Dena Bank were suspected of misappropriating funds worth Rs 436 crore from their fixed deposit customers.