| e Narendra Modi government has cancelled the appointment of six public sector bank chiefs made during the previous UPA rule after a high-level panel found irregularities in their selection.
The government said late on Monday that it has decided to draw up a new process to appoint chairman and managing directors (CMDs) as well as executive directors at state-run banks.
As a result, eight posts of bank chiefs and 14 posts of their deputies will fall vacant and have to be filled up "de novo", the Finance Ministry said in a statement, without giving further details.
The move comes months after an investigation began into whether the head of state-controlled Syndicate Bank took bribes to roll over a loan to family-controlled Bhushan Steel.
A panel headed by the Reserve Bank of India (RBI) governor during the previous United Progressive Alliance government had shortlisted CMDs for Bank of Baroda, Canara Bank, Indian Overseas Bank, Oriental Bank of Commerce, United Bank and Vijaya Bank.
The selections made by the panel had been sent to the Finance Ministry for ratification by the Appointments Committee of the Cabinet (ACC) but the government decided to scrap the entire selection process and fill these vacancies as well as two others, including at Syndicate Bank, through a fresh selection process involving the RBI governor.
Following the arrest of Syndicate Bank CMD S.K. Jain in August for alleged graft, the Finance Ministry had set up a committee comprising the Expenditure Secretary, RBI Governor and Secretary of School Education to examine the appointments at six public sectors banks.
After the committee's report, the government has decided to cancel the current selection process, the Finance Ministry said.
Selections were earlier made by a panel headed by the RBI governor. Applications are processed by the Cabinet Secretary and placed before the Appointments Committee of Cabinet for its final approval.
Finance Minister Arun Jaitley had earlier said the government was scrutinising recent appointments of bank chiefs.
"Time has come to be strict with PSU (public sector undertaking) banks. I have urged the Cabinet Secretary and the RBI Governor to examine recent appointments in public sector banks," he had said.
The Syndicate Bank chief was arrested for allegedly receiving a bribe of Rs 50 lakh.
The investigation not only raised broader concerns about weak oversight, corruption and politically directed lending at state banks, but also brought into focus irregularities in appointments at the banks.
Stressed loans - those categorised as bad and restructured - currently amount to about 10 per cent of all loans, making banks circumspect over lending. Fitch Ratings expects stressed assets to reach 14 per cent of loans by March next year.
While a sluggish economy is the main reason for a rise in distressed assets, an RBI report in August also blamed lending to certain "excessively leveraged" groups.
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