India recruits private sector executives to head state bank reforms

Prime Minister Narendra Modi recruited executives from the private sector to head two of the biggest state-owned banks, making it the first such appointments in a wide-range reform strategy to challenge the dominant but often inefficient lenders backed by the government.

The government announced earlier this year that it planned to overhaul its state banks by hiring five new chief executives, getting the candidates from both the public and private sectors. The government seeks to bring improvements and increase earnings through these new changes. These are all in preparation to tap markets for capital and enhance their balance sheets.

Ravi Venkatesan, the 51-year-old director of information technology group Infosys and ex-chairman of Microsoft and Cummins in India, is recruited as the new chairman of Bank of Baroda.

Meanwhile, the new chief executive of Baroda is P.S. Jayakumar, who used to work at Citigroup and was named managing director of house builder Value and Budget Housing Corp. These former private sector executives are tasked to bring reforms to some of the state-controlled banks that lead the financial sector of India.

There has been plenty of controversy surrounding the public sector banks due to its shady methods of sanctioning loans. These controversies started after Syndicate Bank chairman SK Jain was arrested by the Central Bureau of Investigation for allegedly accepting bribes to improve the credit limits of certain companies.

State banks have dominated the finance sector of India since the nationalization of lenders in the 1960s, during the lead of Prime Minister Indira Gandhi. The state banks control 70 percent of assets in the country. But they have been poorly managed and are riddled with corruption. With the recruitment of new executives, the government is hoping to see changes through restructuring the entire public banking system.