NEW DELHI: India has unveiled a seven-pronged revamp plan to shake up its struggling staterun banks, including a Rs 20,000-crore capital infusion lifeline besides hiring private sector executives for the first time to run public sector lenders. A new umbrella structure under the Bank Board Bureau will guide policy, functioning and appointments. The government, which said these marked the most significant measures since bank nationalisation about 50 years back, assured the lenders that they would be allowed to function without political interference."PSBs ( public sector banks ) play a very important role in the country’s economy. However, they are facing a challenging situation since a few years," Finance Minister Arun Jaitley said on Friday."Government was reviewing PSBs’ health from time to time and believes there is no cause for panic since issues are capable of being fixed," Jaitley said, announcing the framework. The strategy, dubbed Indradhanush (rainbow), focuses on systemic changes in state-run lenders, including a fresh look at hiring, a comprehensive plan to de-stress bloated lenders, capital infusion, accountability incentives with higher rewards including stock options and cleaning up governance."This revamp will be the most comprehensive plan since nationalisation of banks in 1969. This would give banks the strategic space for adequate competitive positioning. The plan envisaged for revamp of PSBs is a bottom-up process, ensuring world-class quality and autonomy," Minister of State for Finance Jayant Sinha said. The government has already announced a comprehensiveRs 70,000-crore capitalisation plan for four years till 2019, which includes an infusion of Rs 25,000 crore in the current financial year.Bankers and experts welcomed the announcement. "These are the kinds of things that needed to be done. I think this is a very good beginning… I think we need to work on raising capital from the market, we need to become efficient in doing that," said Arundhati Bhattacharya, chairman of State Bank of India, the country’s biggest lender. "This will strengthen governance in public sector banks," said Abizer Diwanji, national head of financial services at EY. "There is a pool of talent in the mid level in private banks which can move to public sector banks. One way to tackle NPAs (non-performing assets) is to pool bad assets exposure-wise under SPVs (special purpose vehicles) or somewhere and deal with them as an entity."Executives from the private sector have been hired to run state-owned banks with the government appointing Rakesh Sharma, head of private sector lender Lakshmi Vilas Bank, as chief executive of Canara Bank. PS Jayakumar, chief executive of real estate developer VBHC Value Homes, has been named head of Bank of Baroda.The Bank Board Bureau will start functioning from the next financial year and is the first step toward a full-fledged bank holding company, an entity that will house the government’s stake in state run banks struggling with mounting non-performing loans that have touched 6 per cent of gross advances. Envisaged as a panel of eminent professionals, the bureau will advise banks and act as a link with the government.After a thorough assessment of the contributing factors to NPAs, the government has drawn up a plan that hinges on getting projects moving through expeditious approval and hand holding, taking over management control of equity infusion by promoters, rejigging the duty structure, pushing for flexibility in restructuring of existing loans. Apart from strengthening debt recovery tribunals, several steps have been undertaken to strengthen risk controls and NPA disclosures.The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations. "A clear distinction has been made between interference and intervention," said Hasmukh Adhia, secretary, department of financial services. A robust grievance redressal mechanism is being put in place for customers of banks as well as staff.