Wednesday , 22 January 2020
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Banks in a self-assessment mode

Customers of public sector banks in the state may soon be able to seek information on how their branch fares vis-à-vis peers as a major branch level review is ongoing among banks.

It is not clear when the results of the branch wise performance evaluation will be out or whether the findings will be disclosed to the public. But the exercise is expected to benefit customers as bank heads will be forced to face ground level issues that need to be addressed.  

Check reveals that, over the weekend most bank managers along with their zonal heads were caught up in review meetings as they compared the individual branch progress with the state average based on key performance indicators.

It is learnt that mostly all banks have completed the evaluation process while for others the exercise is ongoing and will be concluded in a day’s time. Post the branch level evaluation banks move on to the next stage of review  viz. an assessment at the state level called by the State Bank of India, the state convenor of State Level Bankers Committee (SLBC) followed by a national level review attended by officials from the ministry of finance and chiefs of all banks.

Banks are evaluating the performance of their branches as per guidelines laid down by the government. The branch-wise evaluation exercise is only for PSU banks. It is a nation-wide exercise ordered by the department of financial services (DFS), New Delhi and Goan bank branches are a part of it.

The performance evaluation is because the government is trying to streamline the banking sector and is worried over the declining share of PSU banks in overall banking. In As of end-December 2018, scheduled commercial banks accounted for 63 per cent of the outstanding credit as against 67 per cent as of June end 2017. Further the PSU banks market share is declining while that of private banks is rising.

Under the evaluation exercise banks are being assigned scores to make comparison easy. The scores are based on answers to questions such as the total lending to MSMEs, corporates and individuals (retail). The reasons for the decline in lending to the corporate sector. The NPA problem, achievements under Mudra and various government schemes.

The government is keen to raise the processes of public sector banks to the level followed by the private banks. Further the government also wants PSU banks to lend more to MSMEs as the sector has the least amount of NPAs compared to large companies. Presently non-banking finance companies (NBFCs) are making steady making inroads in lending to the MSME sector.

According to a DFS report while PSU banks will continue in their role in the transformation of the economy they face certain issues including asset quality, capital adequacy, HR, governance, transmission etc.

“The  above described issues need to be addressed so that the banks are able to disburse advances to the tune of Rs 90 lakh crore by 2025 so as to reach the US $5 trillion economy,” says the report.

The report says that, PSU banks must innovate and tap on the extended ecosystem brought on by technology and digitization. “In PSBs the main dagger is punishment for bad decisions but not enough incentives for good decisions. Hence there is no motivation to take decisions. This needs to be changed,” says the report. 

The report also talks of independent functioning of the board of directors of banks. “There are different ways of achieving this independence. Constitution and composition of board of directors of PSBs should be brought under the Banking Regulation Act in line with the SEBI regulations. The current structure of ownership vs. the holding company structure must be evaluation,” it says.

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