Indradanush plan for bank

INDRADHANUSH PLAN

Background
 The Public Sector Banks (PSBs) play a vital role in India’s economy. In the past few years, because of a variety of legacy issues including the delay caused in various approvals as well as land acquisition etc., and also because of low global and domestic demand, many large projects have stalled.
 Public Sector Banks which have got predominant share of infrastructure financing have been sorely affected. It has resulted in lower profitability for PSBs, mainly due to provisioning for the restructured projects as well as for gross NPAs. To revive the deteriorating state of PSBs government launched Indradhanush Plan recently.
What is Indradhanush Plan
 It is a seven pronged plan launched by Government to revamp functioning of public sector banks.
 The seven elements include
appointments
board of bureau, 
capitalization, 
de-stressing,
empowerment, 
framework of
accountability 
governance reforms
(ABCDEFG).

 Banks board of bureau will replace existing appointments board. Its members would be
appointed in the next six months to be headed by the RBI governor.
 Banks board bureau would also hold bad assets of public sector banks
 The bureau will comprise a chairman and six members, of which three will be from the
government. The remaining three will be professionals from banking and other sectors.
 The bureau will help in the eventual transition to a bank holding company.
 It is an attempt to separate the functioning of the banks from the government by creating
another entity in the middle to act as a link between the two.
 The government has also finalized a new way of monitoring state-run banks. They will be
given marks based on quantitative parameters like NPA management, return on capital,growth and diversification of business and financial inclusion, and qualitative parameters like human resources initiatives and strategic steps taken to improve asset quality.

Challenges
 Indradhanush framework talks about the government putting in Rs 70,000 crore into these banks over the next four years but The PJ Nayak committee report released in May 2014 estimated that between January 2014 and March 2018 "public sector banks would need Rs. 5.87 lakh crores of tier-I capital. So, the government is not investing as much as the public sector banks really need to get out of the current situation that they are in.
 Non-reference to disinvestment.
 Lack of a concrete plan to tackle NPAs.
 Many measures that the government has listed out as a part of the Indradhanush framework have
already been around for a while now, having been put in place by the Reserve Bank of India
 Implementation method of the issue of govt: interference as mentioned in the policy,
 The Nayak Committee had proposed a BBB comprising entirely of senior bankers. Under Indradhanush, the government will be represented on the BBB.
 Experts believe that the real reform is for the government to vest the ownership of all the banks in a single holding company, whose board comprises professionals of integrity. It can select PSB boards and oversee their working.