The Black And White Of Indradhanush

The Black And White Of Indradhanush

Last week, FM Arun Jaitley unveiled a seven-point pronged program termed as Indradhanush. The new plan is launched to revamp operations of public sector banks in India. The seven factors include board of bureau, appointments, capitalization, empowerment, de-stressing, governance reforms and framework of accountability. The reform agenda has received mixed response from the analysts, bankers, markets and public. While analysts have termed the plan as promising, the bankers are not impressed by the move.

Let us discuss the pros and cons of Indradhanush plan:


- Indradhanush can result in structural changes in the public sector banking industry. If the current changes are implemented well, it will offer substantial growth prospects along with improvement in return rations for public sector banks.

- The seven point agenda included the appointment of non-executive chairman, MDs and CEOs of five banks. It is for the first time a competitive and transparent process was implemented to fill these seats.

- Bank Board Bureau abbreviated as BBB is going to replace the Appointments Board that presently engages non-executive chairman and full time directors of PSBs. BBB will certainly have better speed and judicious decisions in terms of appointments.

- The framework of accountability factor comes as a respite for the top management. It will become a big driver for growth. As of now, in public sector banks, other than SBI, Chairmen and Executive Directors earn even less than general managers.

- Greater capital infusion will help bad-debt stricken PSU banks meet their regulatory capital requirements and achieve growth.


- As long as the banks function under the government’s control and the administrators’ micro-manage the functions, little will transform in the space.

- More confidence on private sector bankers compared to public sector officials can destroy the morale of the employees.

- Government interference in Bank Board Bureau can always fill the unit with yes men. As a result, there will be no end to cronyism.

- While analysts have commended empowerment factor, no government intervention is easier claimed than achieved. One draught year will be enough to assess government’s resolve.

- There was no special announcement as far as NPAs are concerned. There was just a general statement that reforms will be responsive and quick.


While the Finance Minister has introduced several positive steps which have been taken well by the market, the experts at the operational level are not confident if it will work. Moreover, expecting public sector banks to match the profitability targets of private sector banks is not justified. The steps are promising but they can only be fruitful when the government’s stake in these units is dropped below 51%. Under the existing dispensation, the talks of merit based compensation and empowerment of PSU bankers are all hogwash.
Post your comment