The central government, it said, has introduced "far reaching changes" in the appointments of top officials to solve many problems faced by nationalised banks.
In a chapter titled "Reforms in banks: performance through leadership", the report said there is now "no lobbying".
The reforms also include "independent professional body for selection", "pool enlarged by opening to private sector", "objective and transparent selection" and "allotment on the basis of merit-cum-performance".
According to the ministry, a lot of the problems in the sector "had to do with the management leadership, which has been under scrutiny for disbursement of poor-quality loans and the possibility of being influenced by interested stakeholders".
Public sector banks need leaders -- chairmen, managing directors, board members -- who can not only clean up the books but also introduce transparent processes and ensure that business decisions are taken solely on merit so as to make these banks profitable in a world where private competition is fast eating into their market share, it said.
"This is what the government had in mind when it introduced far-reaching changes in the appointments of top officials in the bank. The one big step was the setting up of an independent Banks Board Bureau (BBB). It has the mandate to evolve a sound managerial policy for the nationalised banks.
"This would include advising the government on the selection and appointment of board of directors, desired management structure at the board level and developing a suitable performance appraisal system for the said banks," the ministry said in its assessment.
To attract talent, top positions of managing directors and chief executive officers in five large players -- Bank of Baroda, Bank of India, Canara Bank, Industrial Development Bank of India and Punjab National Bank -- are also open to candidates from the private sector, the booklet said.
To improve the structure of governance, the post of chairman-cum-managing director in the banks has been split into a non-executive chairman and an executive MD and CEO, it said.
"It is expected that these reforms in appointment process will result in better governance and eventually reduce NPAs and sustain profitability of public sector banks," the ministry said.
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