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Thread: Need experts, get political directors off my back: PSU bank chief goes public

  1. #1
    C J Karira
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    Need experts, get political directors off my back: PSU bank chief goes public

    Need experts, get political directors off my back: PSU bank chief goes public

    New Delhi, June 25: In perhaps the first such case, the chairman and managing director of a PSU bank has gone public to protest the presence of directors appointed to his board at the behest of the ruling party.
    “I have requested the government to reconstitute the board and I welcome people who have integrity and who can contribute...Banking is a highly complicated sector and we are custodians of depositors,” he said. “The bank board should be professionally represented so that it can contribute meaningfully,” said R P Singh, CMD of Punjab and Sind Bank, at a press conference today.
    Last month, The Sunday Express had reported how the UPA government had crammed at least 32 of the 37 positions for independent directors (called in bank parlance, “non-official” directors) with men and women known for their allegiance to the Congress party.
    Surprisingly, Singh is getting support from the highest quarters. Sources said he got the Finance Ministry’s OK to hold the press conference and moves are on to sack at least two of the five independent directors.
    According to Singh, as the bank tried to reduce its non performing assets (NPAs) — from 17% two years ago to 2.4% today — defaulters felt the “pinch” of the recovery initiative and some of them “have been approaching the non-official directors for gaining concessions in settlements.” Since the bank refused relief, these directors “have launched a false propaganda against” the bank’s management, he said.
    When the bank would go for auctions to sell distressed assets like properties, “we were put under pressure by these directors along with other political pressures from the sides,” said Singh. “We were told not to go for sale and take the settlement route,” he said. This route yields less money than an auction route.
    The bank directors include Krishna Mohini, former Congress MLA from Solan, Himachal Pradesh and vice-president in the All India Mahila Congress; Harcharan Singh Josh, former secretary of the AICC minority cell; Umesh Kumar Sharma, former general secretary of the Haryana Pradesh Youth Congress and K K Sharma, former AICC Secretary. In their complaint to the PM on May 25, these directors appreciated the Congress “tradition” of appointing party loyalists on PSU bank boards. :: Need experts, get political directors off my back: PSU bank chief goes public

  2. Re: Need experts, get political directors off my back: PSU bank chief goes public

    The courage displayed by Mr R P Singh, CMD of Punjab and Sind Bank in highlighting this matter of political appointments really speaks volumes, especially when his peers in the other top PSU banks keep a stoic silence despite the fact that they too have been thrust with their share of the quota of directors faithful to the party.

    In response to the Express Investigations last month on this matter, an editorial appeared in the Business Standard news paper datelined New Delhi, May 08,2007. The same is reproduced below:
    Wresting back control

    Anyone familiar with the history of India’s state-owned enterprises knows that they are invariably victims of pork-barrel politics. The party faithful have to feed off them in various ways, and one time-honoured method is to get on to the boards of directors. Those who are part of the government system are familiar enough with this and with the attendant petty corruption (company cars for the minister’s staff, cell phones for his attendants, air-conditioners in his home, fountains in his garden, and so on), and are sufficiently inured to it to have reached the point where they are grateful if they do not have to be party to bigger shenanigans. This is what makes noteworthy a letter from the chairman of the Punjab and Sind Bank, RP Singh, to the banking secretary in the finance ministry, reported in The Indian Express, which spells out how seriously government-appointed directors have compromised his bank’s functioning. According to Mr Singh, some of the directors have been putting pressure on the bank’s management to agree to unreasonable settlements of non-performing loans; and when the management has refused to go along, the directors have opposed various agenda items brought to the board, thus crippling the bank’s functioning.

    Two points are worth noting. First, it is most unusual for a bank chairman to have the courage to write such a letter, knowing as he must that those who get appointed to his board have all the right political connections. Is it too much to hope that this is part of a larger trend and that those in charge of state-owned enterprises are now willing to speak up and take a stand? The second point is that the Congressmen who have been imposed on banks as directors have been appointed despite the finance minister’s advice to the contrary—readers will recall a similar episode a couple of years ago concerning the petroleum ministry and state-owned oil companies. It would seem that ministers do protest, but eventually give in to pressure from the party bosses. That is why it is all the more remarkable that Mr Singh has gone so far as to say that “if the government wants this bank to survive, the bank should have directors who are not only professionals but also men of integrity and not connected with local politics”.

    The case of banks is special because they have a fiduciary responsibility. If directors who are really not qualified for being on a board proceed to make unreasonable demands or interfere in individual cases, and indeed if some of them are loan defaulters themselves, it is a far more serious matter than a director on an oil company’s board asking that someone be favoured with a petrol dealership. The UPA government swears by the public sector, especially public sector banks; is it too much to ask that it not treat these entities as the private preserve of a political party? "

  3. #3

    Gujarat HC notice to Union finance ministry

    Gujarat HC notice to Union finance ministry
    as reported in Times of India, 23 Oct 2008, TNN

    AHMEDABAD: Gujarat High Court last week issued notice to Union finance ministry and sought explanation about appointment of independent directors in 12 nationalised banks.

    High court acted on a public interest litigation filed by Senior Citizens' Service Trust challenging the appointments claiming that these appointments were political, whereas the provision states that the persons appointed on these posts should have expertise in various fields.

    Praful Desai, executive secretary of this litigant group, has claimed in his PIL that as per Section 9(3)(A) of Banking Companies (Requisition and Transfer of Undertaking) Act, independent directors, who are also known as 'non-official directors' in bank parlance, should possess special knowledge or practical experience in fields such as agriculture or banking or economics or law or small scale industries. Their appointments are usually made to represent the interest of depositors.

    However, in 2007 the Union government appointed 37 independent directors, "of whom 33 are known for their allegiance to the Congress party some are politicians, who have either lost election or loyalists to whom party wishes to dole favour," the petitioner has claimed.

    The petitioner group sought information from the finance ministry under the RTI Act, which said that the list of 60 potential directors, who are chartered accountants, company secretaries, lawyers, economists etc. was not placed by the Banking Department before the cabinet appointment committee, which selected the 37 persons.

    Claiming that these appointments were in violation of the statutory provision and framed guidelines, the Trust filed this PIL. High court has fixed November 19 for further hearing in this case.

    Gujarat HC notice to Union finance ministry-Ahmedabad-Cities-The Times of India

  4. #4
    Atul Patankar
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    Bitter PIL for non-official directors on bank boards

    As reported by Indian Express Bitter PIL for non-official directors on bank boards
    Ahmedabad, November 23 : Senior citizen trust moves court, alleges foul play in selection of 37 independent directors

    The controversy over the appointment of 37 independent directors on the board of Government banks and 33 of them having allegiance to the Congress has now been taken to the court. This issue was first raised by The Indian Express in its edition dated May 6, 2007.
    Challenging the appointments, Vadodara-based Senior Citizens Service Trust has filed a public interest litigation (PIL) in the Gujarat High Court. Trust secretary Praful Desai submitted before the court that these appointments were not done on merit but to favour the politicians connected with the Congress and its allies in the UPA government.
    He contended that the appointment of independent directors, also known as non-official directors in banking parlance, was done by the Department of Banking of the Union Finance Ministry in violation of norms and guidelines.

    Submitting rules regarding the appointment of independent directors in the public sector banks, 70-year-old Desai, who has fought several legal battles for public welfare, claimed in the PIL that the appointments were done under Section 9(3)(A) of the Banking Companies (Requisition and Transfer of Undertakings) Act, 1970.
    According to Clause H of Section 3, nominated directors should be at least graduates and possess special knowledge or practical experience in agriculture and rural economy, banking, cooperative, economics, finance, law, small scale industry or any other field, which, in the opinion of the Reserve Bank of India, could be useful to the bank. Other conditions are that he/she should represent the interest of depositors or that of farmers, workers and artisans. These rules, the PIL claims, were received by the trust from the Union Ministry of Finance through an application filed under the Right To Information Act. Desai said that while the Department of Banking, which is handling the appointment, did not furnish him the educational qualifications and expertise of all the 37 directors, it said the educational qualification of Gujarat Congress leader Maulin Vaishnav, appointed as director of the Bank of Baroda, was reduced as he belonged to the farmers category. According to the petitioner, the Department of Banking had prepared a list of 60 top-notch professional experts for appointment, but they did not place it before the Cabinet Appointments Committee, and selected 37 directors. They included five All India Congress Committee secretaries, a vice-president and a secretary of the All India Mahila Congress and the Seva...
    Claiming that the main reason behind the huge amount of non-official directors is favouritism and non-adherence to norms for advancing loans, the petitioner said the role of independent directors with expertise in various fields was to check corporate misgovernance in banks. But, he pleaded, this objective could never be achieved by the way the UPA Government had made the appointments....

  5. #5
    C J Karira
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    Re: Need experts, get political directors off my back: PSU bank chief goes public

    As reported by TNN in on 25 February 2009:
    Appointments of bank directors under scanner-Ahmedabad-Cities-The Times of India

    Appointments of bank directors under scanner

    Ahmedabad : Gujarat high court has sought files of four independent directors of nationalized banks from the Centre to verify whether
    the appointments took place after proper scrutiny.

    Centre has been asked to produce the documents by March 12, when further hearing on a public interest litigation (PIL) filed by Senior Citizens' Service Trust takes place. The PIL alleges that appointments of the directors by finance ministry were political' and guidelines of Banking
    Act were given a go-by in the process.

    According to the petitioner, out of 37 independent directors appointed in 2007, 33 were known for their allegiance to Congress party'. In fact, some are politicians who have either lost elections or are loyalists whom the party wishes to favour.

    Independent directors, or non-official directors' in banking parlance, are usually appointed to represent the interests of depositors. As per Section 9(3)(A) of Banking Companies (Requisition and Transfer of Undertaking) Act, they are required to possess special knowledge or practical experience in various fields.

    The PIL has quoted information revealed by the ministry under RTI Act that a list of 60 potential directors chartered accountants, company secretaries, lawyers, economists, and so on, was not placed by the banking department before the cabinet appointment committee.

    In reply to the court's notice, Centre's finance department stated that the list was approved by finance minister after consulting Reserve Bank of India (RBI) and getting clearance from departments of income tax, customs, central excise, enforcement directorates and investigating agencies.

    Following these arguments, a division Bench headed by Chief Justice KS Radhakrishnan randomly sought files of four directors Joginder Kaur (Allahabad Bank), Romesh Sabharwal (Central Bank of India), Nafisa Ali Sodhi (India Bank) and Umesh Kumar Sharma (Punjab & Sind Bank) to verify whether proper scrutiny was done.

    However, Praful Desai, executive secretary of the trust, is not satisfied with the court's directions. "The dispute is not regarding proper scrutiny. It's about lack of qualifications and political affiliations of these people which has fetched them the posts. I will file a rejoinder in this regard," he told TOI.


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