Pune: The Finance Ministry is considering a proposal to rope in professionals from the private sector for appointment of chairman and CEO-cum-managing director in state-owned financial institutions as it looks for talent from a wider pool of applicants.

"Private sector candidates may be allowed for both the post of chairman and MD& CEO," a senior finance ministry official said. "If the search committee recommends a candidate all such issues like higher compensation package can be looked at," the official said. The changes can only be made by Appointments Committee of the Cabinet (ACC) headed by Prime Minister Narendra Modi, the official added.

Earlier this week, the government kick-started the management reforms of public sector banks, splitting the post of chairman and managing director-cum-CEO. Recently, the RBI in a paper, Management and Governance issues in PSBs, had recommended that the selection process should be left to an independent panel of experts through open-market, global advertisements for the chairman's post.

It had further recommended that such executives be paid salaries that are comparable with those in other industries. However, given the structure it is unlikely that any one from private sector would apply for post as remuneration level is quite low. This is also evident from the fact that recent selection process for Coal India’s CMD did not see any professional from private sector expressing interest for the top job at the world’s largest coal miner.

The government head-hunter Public Enterprises Selection Board (PESB) ended up selecting a bureaucrat out of 12 who had applied for the top job. Experts said government may seek applications from the private sector but it is quite unlikely that anyone would apply for the post because of huge difference in salary. Meeting criteria for the post of top executive of the public sector banks would also be difficult and it would be difficult to get their vigilance clearance and other regulatory clearances, official said.

If approved, this would be for the first time that government would invite applications from private sector for the top posts of state-owned banks. So far, CMDs of PSU banks were selected from public sector banks only. In the last UPA government an attempt was made to bring in a private sector professional in India Infrastructure Finance Company (IIFCL), a wholly owned subsidiary of the government.

The then Prime Minister Manmohan Singh rejected the name of Deepak Bagla, a partner with London-based private equity firm 3i, recommended by the Finance Ministry for the post of Chairman and Managing Director of IIFCL.