Narasimhmam Committee’s recommendation pertaining to priority sector lending should be implemented without any further delay. (Bring down priority sector lending target from 40% to 10%).

Salary of bank employees should be raised to bring it on par with employees under Department of Atomic Energy. Freebies like LFC, and other claims where there is scope of manipulating bill or other unscrupulous activities should be done away with.

First and foremost thing to be done to increase efficiency of PSB is to see that the tenets of social banking do not clash with the tenets of sound banking. Banking is more a business than a service.The banks are, as of now, hostage to the whims of trade unions which are politically controlled. Curtail powers of trade unions. Make them accountable to the equity shareholders.

Dilute government share holding and increase number of retail share holders. Typically government share holding should be not more than 26%. Banks should be allowed to go on strike and suspend services only when approval from a minimum 26% of shareholders is received.

A separate group with expertise in Cyber Security and Information Technology Infrastructure should be constituted to supervise, analyze and guide the IT groups of Public Sector Banks. Bank’s IT infrastructure should be subject to periodic audits by this group. Their recommendation should be binding on Public Sector Banks. This expert group should come under Ministry of Home Affairs and report to National Security Advisor. Governor of RBI should be ex officio chairman of this group.

Banks must NOT be allowed to undertake insurance business and portfolio management. This will ensure that they engage more in lending for earning and not on commission from insurance companies.

A separate group within each PSB which mines the data available with bank to analyze customer trends and helps in devising customer centric products should be created. Encourage the loan recovery group and marketing and sales group to be Techno Savvy and harness the use of technology in reaching out to customers.

Each Public Sector Bank should pay a fixed percent of revenue, say, 0.25 percent as royalty or subscription charges to Government of India, in addition to the dividend. In return to these charges, Government of India should make available crucial data regarding individuals and companies it has, so that banks can make an informed decision while providing credit. This will help in reducing NPAs and also check money laundering to a large extent.

Large Scale exodus from the Banking sector can be expected in 2015,2016. The VRS optees can also be on an increase. Reasons are obvious.

For employees with grade Assistant Manager and above, a component of their salary should be tagged with the profitability of banks. As an employee’s grade increases, there should be a commensurate increase in the component of salary tagged to profit. For illustration, 15 percent of Assistant Manager’s salary should be variable, i.e. it should be fixed based on bank’s profit in previous quarters.