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.
· 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.
· 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.
· 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.