Politicians and bank management
An article on the matter was published in a local daily on 9 December, giving the pragmatic opinions of the Hon. Finance Minister as well as an Adviser of the last caretaker government. The opinion expressed by them against introducing politicians in bank management was very appropriate and realistic. They rightly pointed out that with politicians in the bank's board of directors; financial discipline and prudence will be sacrificed for expediency.
Also, such a step if taken, will be against the fundamental ethics of public sector banking; without their holding any shares or financial stake and not proposed by the members of the bank's board. In a private bank, the board may do so. However in a public sector bank, this will amount to the board member, exercising authority without any financial responsibility or risk involved for him!
This will lead towards a potential route to disaster, where prudence will be overruled to satisfy the politician's sphere of influence subjectively! The politician will exercise his political authority and power in giving loans to parties with little or no sound financial base or justification. This will jeopardise the normal prudence and financial judgment, that is essential for professional banking portfolio management!
With politicians calling the shots, all these barriers and precautions will be selective in financing loans. This important discipline will gradually be eroded, and subjectivity will be the order of the day! We hope good sense prevails; and the government in overall national banking; does not allow political expediency to overrule the norms of banking by inducting politicians to hold responsible decision making positions in public sector banks.
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