In recent news, the Cabinet Appointments Committee (ACC) has passed a resolution to institute the Financial Services Institutions Bureau (FSIB), effectively replacing the Banks Board Bureau (BBB). This decision was initiated by the Department of Financial Service within the Ministry of Finance.
The Role of the Financial Services Institutions Bureau
The main responsibility of the FSIB is to select lead officials for public sector banks and insurance companies. Its mandate extends to issuing guidelines and recruiting general managers and directors for state-run non-life insurers, general insurers, and other Financial Institutions. The FSIB will serve as a central body, making recommendations for the appointments of Whole-time Directors (WTD) and Non-executive Chairmen (NEC) in Public Sector Banks, Private Limited companies, and Financial Institutions in India.
In order to adjust to these new responsibilities, the Department of Financial Services must first instigate necessary modifications within the Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 (as amended).
Appointment of FSIB Chairman
Bhanu Pratap Sharma, former Chairman of the BBB, has been appointed as the Initial Chairman of the FSIB by the ACC. His tenure is set to last for two years.
Understanding Public Sector Banks and Financial Institutions
A Public Sector Bank (PSB) is one where the government owns a significant percentage of the shares. For instance, the government holds approximately 60% of the shares in the State Bank of India, categorizing it as a PSB.
A Financial Institution, on the other hand, refers to any company involved in financial or monetary transactions. These transactions can involve loans, deposits, investments, and more. All India Financial Institutions (AIFIs) come under this umbrella and are supervised by the Reserve Bank of India. Examples include the National Bank for Financing Infrastructure and Development (NaBFID), Export-Import Bank of India (EXIM Bank), and the National Bank for Agriculture and Rural Development (NABARD) among others.
Understanding the Banks Board Bureau
Established in 2016 based on the recommendations of ‘The Committee to Review Governance of Boards of Banks in India, May 2014’, the Banks Board Bureau not only recommended appointments for whole-time directors and non-executive chairpersons of PSBs but also provided personnel recommendations for government-owned insurance companies. The Bureau’s duties included formulating strategies for the growth and development of all PSBs in consultation with their board of directors.
However, the BBB was recently stripped off its power to select directors of Public Sector Undertaking, general insurance companies by the Delhi High Court. This decision has already been enforced by the government, who terminated the terms of serving directors selected by the BBB. The court also ruled that the BBB lacked competency to select general managers and directors for state-run general insurers. As a result, two significant insurance firms, New India Assurance and Agriculture Insurance Company, have remained without regular CMDs for over 100 days.