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Rajan listed a number of institutions that oversee banks,
including parliament, the recently created Banks Board Bureau to
improve governance at state-owned lenders and the Reserve Bank
of India.
He added that the government and the RBI also needed to reduce
the difference in treatment towards private lenders and their
state-owned rivals, which are subject to mandates including
lending to under-served segments of the population.
However, the RBI governor, who is due to step down on Sept. 4,
said his views were intended to start a discussion and did not
represent the formal stance of the RBI.
"With so many overlapping constituencies to satisfy, it is a
wonder that bank management has time to devote to the management
of the bank," Rajan said in an address to a bankers' conference
in Mumbai.
"It is important that we streamline and reduce the overlaps
between the jurisdictions of the authorities, and specify clear
triggers or situations where one authority's oversight is
invoked."
Rajan added that banks' boards needed to be empowered to provide
proper oversight of banks, suggesting the RBI should withdraw
its representative from boards at state-owned lenders and
provide a "pure regulatory role", an action that would require a
change to current legislation.
Restoring India's state-owned banks to health is vital for Prime
Minister Narendra Modi to revive lending, investment and create
jobs for the million young Indians who join the labor market
each month.
Government-owned lenders account for around 70 percent of
lending in Asia's third-largest economy.
(Reporting by Abhirup Roy and Rafael Nam; Editing by Kim Coghill)
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