INDIA has brought in private sector executives to run two of its largest state-owned banks, the first such appointments in a broad reform plan to shake up the country’s dominant but often inefficient government-backed lenders.

    Earlier this year, the government announced steps to overhaul its state banks, including the appointment of five new chief executives, with applications welcome from both public and private sector candidates.

    The government hopes these changes can help the banks to improve governance and boost earnings, important measures as they prepare to tap the markets for capital to strengthen their balance sheets.

    The move also fits with Prime Minister Narendra Modi’s preference for modernizing the management of state-run firms, rather than privatizing them, a policy he honed in his home state Gujarat where he made failing state industries profitable.

    India had previously always picked bosses for public sector banks from the state sector, which makes up more than 70 percent of the country’s banking assets but has lagged private rivals in profitability and has amassed bad loans at a faster pace.

    India’s banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic growth hurt companies’ ability to service debt.

    The government Friday named Rakesh Sharma, head of private sector bank Laxmi Vilas Bank, as chief executive of Canara Bank, and appointed P.S. Jayakumar, chief executive of real estate developer VBHC Value Homes Pvt, as head of Bank of Baroda.

    It also named chief executives for Bank of India, IDBI Bank and Punjab National Bank from within the state sector.

    (SD-Agencies)