Reserve Bank of India Governor Raghuram G. Rajan Monday called for the public sector banks (PSB) to root out corrupt officials, bad practices and weak capabilities, and suggested the process of appointment of government bank boards should be changed.

 

 Speaking at a banking conference here, Rajan said the non-performing assets (NPA) have increased for the banking sector and a significant portion of these is in large infrastructure projects financed by PSBs.

 

 While bad economy, poor structuring and slowdown in government contributed to NPA levels, there are allegations of malfeasance as in the case of Syndicate Bank case, he said.

 

 He said there are lots of good people in PSBs but there is a need to root out bad apples, bad practices and weak capabilities.

 

 According to him, the governance reforms in PSBs include splitting the posts of chairman and managing director into two, longer tenure for the chief executive officer, and change in the appointment process for the members of the bank board.

 

 He said PSBs should be allowed to make commercial decisions, and government mandates should be backed by financial payments.

 

 Referring to the banks that do not follow its direction on two-factor authentication for payments by credit cards, Rajan said the rule of law should be implemented and not be violated just because the innovation is 'cool'.