Former SEBI Chairman Damodaran Blasts Government Over Banks Board Bureau
M Damodaran, Former SEBI Chief. (Source: BloombergQuint)

Former SEBI Chairman Damodaran Blasts Government Over Banks Board Bureau

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Former chairman of the Securities and Exchange Board of India M Damodaran came down heavily on the Banks Board Bureau saying its existence shows the government's “abdication of responsibility.”

The BBB, which started functioning April 2016, was constituted to recommend government on selection of heads of public sector banks and financial institutions and help banks in developing strategies and capital raising plans.

"In my view, the existence of the BBB is a manifestation of the abdication of responsibility. The power to appoint the chairman of a nationalised bank is the power that the statue has given to the government and it cannot be given to some third party.

"When this objection was raised, they said it is a recommendatory body. Why do you need that recommendatory body?" Damodaran wondered while speaking at an event organised by the Maharashtra State Bank Employees Federation on 'Five decades of bank nationalisation.'

The bureau work is to engage with the board of public sector banks to formulate appropriate strategies for their growth and development. It also searches and selects heads of public sector banks and helps them to develop differentiated strategies of capital raising plans to innovative financial methods and instruments.

It is responsible for selecting non-executive chairman and non-official directors on the boards and is now headed by Bhanu Pratap Sharma, former personnel and training secretary. It has three ex-officio members and three part-time members.

Damodaran said the problem with the public sector banks is that the majority owner (government) either does not understand the difference between ownership and management or is unwilling to understand the dichotomy.

"So, if the owner believes that the management resides with the owner then you don't need a chairman and a board of director. You can keep on making telephone calls from Delhi," Damodaran said.

Talking about efficiency of PSBs, he said efficiency is ownership neutral and is a function of management.

"You can have good units in the public sector and you also have bad units, depending on who manages that or who is allowed to manage them. In the past 18 months we have seen what has happened to the private sector banking. How many of them came to grief?" he stated.

Noting the fact that two of the three bank accounts are with PSBs, Damodaran said, "whoever else might have lost hope but common hasn't given hope. The common man still feels comfortable with public sector banks."

Damodaran refused to comment on the board room battle at Indigo, where he is the chairman of the board.

Also read: ‘PSB Loans In 59 Minutes’ Sets Its Sights On Larger Advances

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