News Column

CMD's post could be split in state- run banks

August 26, 2014



THE finance ministry is looking at separating the posts of chairman and managing director ( CMD) in public sector banks as part of the move to strengthen corporate governance in the wake of the scams that rocked Syndicate Bank, Oriental Bank and Dena Bank. Financial services secretary G. S. Sandhu said on Monday that the government is considering the proposal to split the CMD's post.

The Reserve Bank of India had earlier recommended to the ministry that the post of chairman should be separated from the post of MD as the current system of a CMD heading a public sector bank gave the incumbent absolute power on the Board.

RBI had observed that since the CMD tends to dominate the Board, a separation of the posts would empower the Board.

Last week, Union finance minister Arun Jaitley had said that the government is taking steps to professionalise management of state banks and help them strengthen the risk- management system.

All public sector banks are headed by a CMD with the exception of the State Bank of India, where the top position is commanded by the chairman and there are four MDs with clearly defined executive roles.

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 CMD. The panel had recommended bifurcation, which was implemented by private sector banks in 2007.

Earlier this month, Syndicate Bank CMD S. K. Jain was arrested for allegedly receiving a bribe of ` 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries. Later, Central Bureau of Investigation probes revealed a ` 3.5- crore cash trail to Jain.

Officials of Oriental Bank of Commerce and Dena Bank were also found to have misappropriated funds to the tune of ` 436 crore from their fixed deposit customers.

The government has initiated a forensic audit into the scam.


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Source: Mail Today (India)


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