Friday, August 21, 2015

Appointments in Public Sector Banks

Persons from private sector were appointed as MD & CEO and non-executive Chairman of Bank of Baroda. Bank unions predictably criticised the move. The stock market equally predictably reacted by posting a 12% jump in the bank's share just on one day. The price has softened subsequently.

There are merits and demerits in this move. What is astonishing however is the subsequent clarification from the Finance Ministry that the new policy of utilising talents from private sector applies only to the top five PSBs. MDs and EDs of other PSBs will be selected from the pool of PSB officers only.

What could be the rationale for differential treatment of the top five banks? Normally experiments are conducted in smaller organisations and if successful, they are repeated in the larger ones. What the Finance Ministry is doing is counter-intuitive.

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