What the seven colours of ‘Indradhanush’ should have stood for
The government has laid out 7-pronged action plan from A to G for reforming public sector banks. It will not make one wiser on several policy issues. Here is what a 7-pronged plan should have looked like
On 14 August 2015 Finance Minister Arun Jaitley announced a Seven Step Revamp Programme for Indian Public Sector Banks. Essentially a re-packaging of measures in progress, the seven colours of the programme enshrined “Indradhanush” comprise:
A new approach to top-level appointments (Allowing entry of talent from outside)
Bank Board Bureau: This will come into being on April 1, 2016 and will be the nucleus for a Bank Holding Company to be established later
Capitalisation: An announcement about pumping additional capital of Rs 20,000 crore distributed among 12 PSBs including State bank of India.
De-stressing: Meaning management of NPAs
Empowerment: More flexibility in hiring staff
Framework of accountability: ESOPs and higher performance bonus
Governance reforms: Strategy to be discussed at next Gyan Sangam during January 2016.
In reality, excluding induction of a couple of executives from private sector at the top and release of Rs20,000 crore additional capital, everything else, represented by alphabets B, D, E, F and G here are, to borrow a phrase from RBI Governor Dr Raghuram Rajan, “Work in Progress”. Even an interview given by Minister of State for Finance Jayant Sinha to a mainstream financial newspaper does not make one wiser about the direction in which government intends to go on several other more important colours of Indradhanush (if that is the code name for banking reforms affecting public sector banks). An illustrative list follows:
Attrition management: In addition to attrition due to ageing, public sector banks will see migration of their staff to private sector during the next five years as more banking institutions are being set up in the private sector. Retaining talent will be a challenge. The dependence on contract employment and ‘outsourcing’ skilled work (including IT-related projects) has not been cost-effective, besides their impact on employee-morale which is an aspect extremely significant for jobs in financial sector. High time, HR management in financial sector as an issue, as skill-needs here are different from building workers.
Branch expansion, ATMs and Banking Correspondents: Branch expansion has to be need-based. Here sharing of centres among banks (both public and private sector) has to be more realistic. This did not find a place in government’s revamp programme, because it involves regulatory measures. Working of ATMs, including their fee-structure and positioning need more attention. How the Banking Correspondents have fared also need to be studied from cost and efficiency angles.
Consolidation: Delaying consolidation is a drain on resources. Here the Narasimham Committee recommendations relating to Universal Banks, Large banks and Local Banks need to be re-visited in the changed context of the Multi-Agency System (with different categories of banks in the commercial category) now being contemplated. 
Diversification of business: Like the present proposal from RBI to allow urban cooperative banks to become full-fledged commercial banks, each bank will have to identify its strengths and weaknesses and decide the business-mix it can focus on.
Employee morale: This is a neglected area in financial sector. It is not just about wage structure or job security. A sense of belonging needs to be inculcated. Banks can learn a lot from Tatas in this area.
Fast track reforms: Government and RBI should identify areas where reforms can follow a fast track. So far, the negotiation and debate have been on shifting power from statutory bodies to finance ministry, rather than introducing sector-specific reforms.
Globalisation: We should try to improve performance of our institutional system by adhering to global standards. Recently, Prime Minister was talking about the quality of our handlooms. India’s cooperatives can become world-class organisations, if they get proper guidance and a de-politicalised environment to function. Perhaps, select cooperative banks can be made models for working further on the idea.
(MG Warrier is former general manager, RBI, Mumbai and author of the 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”.)
Meenal Mamdani
6 years ago
Excellent article.

Employee morale is very important as the author says. Are bank managers given credit for increase in deposits in their branches? Is an employee rewarded publicly for exceptional service or suggestions for improving efficiency?

Neral, at the base of Matheran, is growing fast. But the development has been lop sided with all the commercial establishments including bank branches on just one side of the rail tracks which run through the town. Residents of the other side have been asking for a branch for a while. Two lady officers of SBI accepted our invitation to de-mystify banking for the women on the undeveloped side. During discussion women asked for a SBI branch on their side. We were told to submit a request to the bank, signed by local gram panchayats, etc. As expected nothing has happened over the last 6 months. If there were sufficient rewards for showing initiative I am sure the bank officers would have pursued this request in the bank hierarchy.

Public sector employees are managed with ineffective sticks and not enough carrots. This needs to change.
MG Warrier
Replied to Meenal Mamdani comment 6 years ago
Thanks. There are certain forces working against improvement in Human Resources Management in Government and public sector. Efficiency of public sector directly affects the profitability of private sector. Tragedy is, private sector wants to enjoy the creamy layer of business and would prefer 'less attractive' or 'more difficult' tasks to remain with government or public sector!
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