The government has set in motion the process of merging the posts of chairman and managing director in public sector firms in the financial sector, a move that will entrust all operational decision-making powers to the chief executive officer (CEO) who will also function as the executive chairman.
The National Bank for Agriculture and Rural Development (NABARD) — the state-owned entity that lends to banks primarily for financing their farm loan portfolio — could well turn out to be the first such company where the two posts will be merged.
The move, if implemented across the financial sector at a later stage, could potentially change the organisational structure of State Bank of India (SBI) — the country’s largest lender.
In the present structure, SBI is headed by a chairman and two managing directors. Besides, each of its six subsidiary banks is headed by a managing director.
“In organisations such as NABARD, SBI and IFCI, the structure of separate chairmen and managing directors at the helm of affairs is not working out and that is affecting the day to day functioning of these entities,” a senior government official told Hindustan Times on the condition of anonymity.
The government has so far interviewed 23 officials for the post of NABARD chairman that fell vacant last week after U.C. Sarangi’s retirement. Rakesh Singh, additional secretary, financial services in the finance ministry has taken charge of NABARD for the time being.
“Separation of chairman and CEO’s posts carries the risk of creating two power centres within the same organisation, which might adversely affect productivity,” U.D.Choubey, director general of Standing Conference of Public Enterprise (SCOPE) told HT. SCOPE is the apex body of central public sector undertakings in the country.