 "Indradhanush set to get bigger, better")
In August 2015, around the time that the Reserve Bank of India had almost firmed up its asset quality review, the government put in place the building blocks for a lease of life to public sector banks; the action plan was called Indradhanush, or rainbow.
The Indradhanush plan envisaged infusing equity worth Rs 70,000 crore through March 2019 to meet Basel III norms for capital adequacy.
One year on, it is time for a status check on how it has fared at ground level.
PSB executives and analysts say the implementation has been tardy, suggesting that the plans are drifting, even as they praise the government for making a start with the right intent.
The capital committed (Rs 70,000 crore) is grossly inadequate given intense asset quality pressures and expectation to support growth, said an analyst with a rating agency.
Meanwhile, the government is revisiting capital commitments and will draw up fresh plans.
Under the Indradhanush plan, the government also promised autonomy and professionalism to improve governance at banks, going so far as to splitting the post of chairman and managing director to further this goal.
It formed the Bank Board Bureau (BBB), headed by former comptroller general Vinod Rai, to oversee the appointments of whole time directors and non-executive Chairman. The BBB is also now tasked to assess capital requirements, fashion business plans and also present road-map for consolidation. "There is much more on (the) plate for BBB than thought originally,” said bankers, speaking on condition of anonymity.
The government has filled the posts of non-executive chairman in some banks. In some, like the Chennai-based Indian Overseas Bank, it is yet to appoint either a chairman or a chief executive.
Acutely aware of asset quality challenge, the government did take outline steps under the plan to get stalled infrastructure and core sector projects off the ground.
“Things are moving only at slow pace. Much depends on revival in economy and business,” said a senior banker with a Mumbai-based public sector bank.
A new Insolvency and Bankruptcy Code is also expected to help resolve stressed assets but that is only in medium term.
The finance ministry came up with a framework for measuring performance of PSBs; now, Key Performance Indicators (KPIs) have replaced statement of intent.
