Bank Board Bureau: Government Proposes Replacement

Bank Board Bureau UPSC: Relevance

• GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Bank Board Bureau: Context

• Government of India is planning to introduce a new entity in place of the Banks Board Bureau (BBB) to recommend candidates for appointments to senior management-level posts in financial institutions.

Bank Board Bureau recommendations: Key points

• The proposed body would have a wider and more legally tenable mandate to recommend candidates for appointments to senior management-level posts in state-run banks, insurance companies and other financial institutions.
• The extended term of the BBB members ended on April 10 and the government was proposing a revamped mechanism in its place.
• The new entity will consist of some of the current BBB members as well, given their experience in handling such appointments.

Replacing BBB: Why needed?

• Last year, Delhi High Court directed that the BBB cannot select the general managers and directors of state-run general insurers, as it was not a competent body.
• After this direction, at least half a dozen newly-appointed directors of non-life insurers had to vacate their positions.
• This ruling came on a case filed by National Insurance Company general manager, who had complained that people junior to him were selected by the BBB for the position of directors in public-sector general insurers twice.
• The court also set aside relevant circulars that enabled the BBB to make such selections.

What is bank board bureau?

• In 2014, a committee to review the Governance of Boards of Banks in India chaired by P.J.Nayak recommended setting up of Bank Board Bureau.
• In 2015, the finance minister announces creation of BBB in Budget speech 2015-16.
• The government set up the BBB in 2016 with an aim to appoint the personnel for the boards of public-sector banks, financial institutions and insurance companies and “recommend measures to improve corporate governance in these institutions.
• The body was also tasked with engaging with the directors of PSBs to prepare strategies for their growth and development.

Functions of bank board bureau

• To be responsible for the selection and appointment of Board of Directors in PSBs and FIs (Whole-time Directors and Non-Executive Chairman);
• To advise the Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Board of Directors of the above mentioned levels;
• To advise the Government on the desired structure at the Board level, and, for senior management personnel, for each PSB and FI;
• To help banks to develop a robust leadership succession plan for critical positions that would arise in future through appropriate HR processes including performance management systems.
• To build a data bank containing data relating to the performance of PSBs/FIs and its officers;
• To advise the Government on the formulation and enforcement of a code of conduct and ethics for managerial personal in PSBs/FIs;
• To advise the Government on evolving suitable training and development programmes for management personnel in PSBs/FIs; and
• To help banks in terms of developing business strategies and capital raising plan etc.

Bank board bureau chairman 2022

• BBB is now practically non-functional. In April 2020, the Appointments Committee of the Cabinet (ACC) had approved the extension of the term of the BBB’s part-time chairman BP Sharma and other members for a period of two years, which has now ended.
• BP Sharma had been heading the BBB since 2018 after the tenure of its first chairman and former Comptroller and Auditor General (CAG) of India Vinod Rai got over.

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