The Telegraph
Wednesday , April 9 , 2014
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Govt rejects RBI idea to split top bank post

New Delhi, April 8 (PTI): The finance ministry has turned down the Reserve Bank’s proposal to separate the post of chairman and managing director in public sector banks, saying this position does not enjoy absolute powers as is being claimed by some international experts.

Rejecting the RBI’s proposal to restructure the board of PSU banks, the finance ministry in a communication to RBI governor Raghuram Rajan said, “The board is headed by CMD (but that) does not mean that CMD enjoys absolute power and the board of the bank is subservient to CMD.”

The finance ministry said this in response to the RBI’s contention that CMDs of public banks enjoy immense powers.

The central bank, according to sources, had also said CMDs often dominated the board during their tenure and therefore it recommended that the post of CMDs be separated to empower the board.

However, the finance ministry said the board was a collective decision-making organ through which major decisions were implemented and to say that the CMD enjoyed absolute power and disregarded the decision of the board of the bank was not factual.

Chairmen and managing directors of public sector banks are thorough professionals, having long careers in the banking sector and they are well aware of the issues to be tackled in this segment.

In PSU banks, the top executive is designated as chairman and managing director, with the exception of the SBI, where the top honcho is the chairman and there are four managing directors with clearly defined executive roles.

The posts of chairman and managing director in the private sector are held separately.