No freedom at the top

The managerial autonomy package for the public-sector banks, announced by the Centre on Tuesday, does not address two crucial issues "" salary package of the chief executive officers (CEOs) and the role of the Central Vigilance Commission (CVC).

Although no bank CEOs went on record on these issues, they admitted in private that unless these are tackled, the proposed autonomy is unlikely to be effective.

While specialised cadre can be given higher pay scales, the package made no mention of the remuneration at the top although the apex banking body, Indian Banks' Association, had made a strong pitch for market- related salaries for the CEOs.

Another untouched recommendation had been to remove public-sector officials from the purview of the CVC and the Central Bureau of Investigation. This, however, cannot be made through a mere announcement.

It needs an amendment to the CVC Act since the commission has the powers to scrutinise activities of all public institutions in which the government holds over 51 per cent. Alternately, the government stake in the PSU banks will have to be trimmed below 51 per cent.

AK Khandelwal, chairman and managing director (CMD), Dena Bank, said the new norms would be the first step in creating a level-playing field between the state owned banks and the private banks.

"We will be allowed to recruit specialised cadre in the IT and treasury departments at higher pay," he added. This is likely to help banks hire and retain more professionally qualified personnel.

There will certainly be faster decision making in state-run banks, said V K Chopra, CMD, Corporation Bank. "Opening of overseas branches and subsidiaries will certainly be faster now." However, the private banking industry felt that things would not change overnight.

Said Bhaskar Ghose, managing director, IndusInd Bank: "It would take a little more to free PSU banks. In order to attract talent the banks need to be given greater autonomy to make the compensation market-related."