Indradhanush- The A.B.C.D.E.F.G of Banking Sector Reforms.

Indradhanush- A.B.C.D.E.F.G of Banking Sector Reforms

  • The Indradhanush framework includes seven pronged plan, for revamping Public Sector Banks (PSBs) of India.
  • Announced by Finance Minister Mr. Arun Jaitley in August 2015.


Reforms Remarks
1. Appointments.

·         Separate the post of Chairman and Managing Director.

·         Chairman represents the interests of shareholders of the bank while Managing director is responsible for functioning of the bank.

·         In order to avoid any undue influence of shareholders (Mainly Government), this step is required.


2. Bank Board Bureau (BBB)

·         BBB will replace the Board for appointment of Whole-time Directors and non-Executive Chairman.

·         It will comprise of a Chairman + six members- three officials and three experts (minimum two from banking sector).

·         The Search Committee for members of the BBB would comprise of the Governor of RBI and Secretary (Financial Services) and Secretary (DoPT) as members.


3. Capitalisation.

·         Adequately capitalize all the banks to keep a safe buffer over and above the  Extra capital for the next four years up to minimum norms of Basel III.

·         Around Rs.1,80,000 crore will be needed by 2019.

·         Government to make available Rs.70,000 crores.



4. De- Stressing.

·         NPAs are rising because projects are stalled due to delays in approval from various Government departments. Following steps have been taken.

·         Project Monitoring Group has been constituted to facilitate pending approval.

·         Address long-term availability of fuel for projects.

·         Promoters to bring in additional equity (shareholders money) to address the rising debts on delayed projects.

·          Flexibility in restructuring of existing loans by banks.


5. Empowerment. ·         No interference from Government and Banks are encouraged to take their decision independently keeping the commercial interest of the organization in mind.

·         Build robust Grievances Redressal Mechanism for customers as well as staff.

·         Greater flexibility in hiring manpower.

6. Framework of accountability ·         Key Performance Indicators (KPIs) to be measured for performance of PSBs.

·         Performance evaluated through the KPI framework will be linked to the performance bonus.

·         Streamlining vigilance process for quick action for major frauds including connivance of staff.


7.Governance reforms

·         The process of governance reforms started with “Gyan Sangam”- a conclave of PSBs to discuss on optimizing capital, digitizing processes, strengthening risk management, improving managerial performance and financial inclusion.


About the author: Aman Kumar

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