Banks Board Bureau, Overview, History And Functions
Praveen Kushwah30 Oct, 2023
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Banks Board Bureau
The Banks Board Bureau (BBB) is an autonomous advisory body established by the Central Government to enhance the management of Public Sector Banks (PSBs). It started operations on April 1, 2016, and is located at the Central Office of the Reserve Bank of India in Mumbai. The Banks Board Bureau, formed in 2016, is a crucial step in reforming banks, especially public sector ones. It gained attention during India's 50 years of bank nationalization in 2019. The bureau focuses on developing methods for appointing, extending, and terminating board members in public sector banks, insurance companies, and financial institutions.
Banks Board Bureau Overview
The Banks Board Bureau (BBB) is an independent body under the Government of India with a key role in selecting individuals for leadership positions in Public Sector Banks (PSBs), Public Sector Financial Institutions, and Public Sector Insurance Companies. Additionally, it focuses on proposing measures to enhance corporate governance within these institutions.
Banks Board Bureau History and Formation
The Banks Board Bureau (BBB) started with the recommendations of 'The Committee to Review Governance of Boards of Banks in India, May 2014 (Chairman - P. J. Nayak). The BBB established in 2016, operates as an independent body comprising eminent professionals and officials.
The establishment of the Banks Board Bureau (BBB) marked a crucial moment in the ongoing efforts to reform and revamp public sector banks (PSBs) in India. Initiated based on the recommendations of the Nayak Committee, which was tasked by the Reserve Bank of India (RBI) to propose reforms for PSBs, the announcement came in August 2015 as part of the broader "Indradhanush Mission."
Its primary role is to provide recommendations for the appointment of whole-time directors and non-executive chairpersons for Public Sector Banks (PSBs) and state-owned financial institutions. The Ministry of Finance, in consultation with the Prime Minister’s Office, makes the final decisions on appointments.
Banks Board Bureau Objectives
The Banks Board Bureau was envisioned to bring about a paradigm shift in the governance and business strategies of state-owned banks. The overarching goal was to elevate these banks to a competitive standing comparable to their private sector counterparts, fostering efficiency and competitiveness.
Banks Board Bureau (BBB) Functions
The BBB operates as a not-for-profit autonomous body and plays a crucial role in assisting PSBs. Its functions include providing support for restructuring business strategies, formulating plans to address bad loans, recommending innovative financial instruments for capital raising, and advising on top-level appointments in PSBs. Additionally, it offers guidance on consolidation and merger plans and assists in matters related to the appointment and termination of services for bank directors.
Banks Board Bureau Leadership and Transition
In February 2016, the first BBB took shape with its headquarters situated in Mumbai, Maharashtra. Vinod Rai, a former Comptroller & Auditor General, assumed the role of the inaugural chairman. His seasoned leadership played a crucial role in steering the initial trajectory of BBB. This move marked a transition from the previous Appointments Board, reflecting the government's commitment to a more streamlined and effective approach to appointments and governance within PSBs.
BBB's composition reflects a deliberate blend of expertise and representation. The bureau includes the Chairman, three ex-officio members representing key government departments, and five expert members, two of whom bring private sector perspectives. This composition ensures a balanced mix of government representation and industry insight, facilitating well-informed decision-making.
Transition to Financial Services and Insurance Board (FSIB)
A recent legal challenge questioned the efficacy of BBB's appointments, leading to a significant development. In response to the administrative complexities arising from the court ruling, BBB was dissolved. In its place emerged the Financial Services and Insurance Board (FSIB), a regulatory entity approved by the Appointments Committee of the Cabinet, chaired by the Prime Minister. This strategic shift aimed not only to address controversies but also to usher in a renewed approach to the governance of both public sector banks and insurance companies.
Banks Board Bureau (BBB) Responsibilities
- Personnel Recommendations for PSBs and Insurance Companies: Besides suggesting personnel for PSBs, BBB has the additional responsibility of recommending individuals for directorial positions in government-owned insurance companies.
- Strategic Engagement: The Bureau actively engages with the board of directors of public sector banks, contributing to the formulation of appropriate growth and development strategies.
- Corporate Governance Enhancement: A key task for BBB is to enhance corporate governance within public sector banks. This involves initiatives aimed at building capacities and other related functions.
Banks Board Bureau Status as a Public Authority
The Banks Board Bureau is recognized as a public authority under the Right to Information Act, 2005. This designation emphasizes its accountability and transparency in its operations and decision-making processes.
Banks Board Bureau Additional Responsibilities
Apart from its primary functions, the BBB focuses on building a comprehensive data bank regarding the performance of nationalized banks and their officers. It also advises on the formulation of a code of conduct and ethics for managerial personnel in these banks and recommends suitable training and development programs for their staff.
Banks Board Bureau Key Mandates
The BBB is entrusted with various mandates to fulfill its objectives effectively:
- Director Selection and Appointment: Recommending suitable individuals, including Whole Time Directors and Chairpersons, for Nationalized Banks, Financial Institutions, and Public Sector Insurance Companies.
- Government Advisory Role: Providing advice to the Central Government on crucial matters such as appointments, confirmation or extension of tenure, and termination of services for directors of designated institutions.
- Management Structure Recommendations: Advising the Central Government on the optimal management structure for designated institutions at both the Board of Directors and senior management levels.
- Performance Appraisal System: Offering guidance on implementing an effective performance appraisal system for the designated institutions.
- Data Bank Establishment: Creating a comprehensive data bank containing information on the performance of designated institutions and their officers.
- Code of Conduct and Ethics: Advising the Central Government on formulating and enforcing a code of conduct and ethics for managerial personnel in designated institutions.
- Training and Development: Recommending suitable training and development programs for managerial personnel in designated institutions.
- Business Strategy Assistance: Assisting banks in developing business strategies, capital-raising plans, and other relevant initiatives.
- Additional Responsibilities: Undertaking any other tasks assigned by the Government in consultation with the Reserve Bank of India.
Banks Board Bureau Legal Framework
The legal framework for BBB was established through an amendment to the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980, officially notified by the Central Government on March 23, 2016. Following this, the BBB commenced its operations on April 01, 2016, functioning as an autonomous recommendatory body.
Banks Board Bureau Role in Governance Reforms
The BBB represents a significant stride towards governance reforms in Public Sector Banks (PSBs), aligning with the recommendations put forth by the P.J. Nayak Committee.
Banks Board Bureau Chairman and Headquarters
- Bhanu Pratap Sharma has been serving as the Chairman of the Banks Board Bureau since 2018. The headquarters of BBB is located in RBI's Byculla Office in Mumbai.
- The BBB Secretary (Debasish Panda), Ex-Officio Members (Sailesh and N S Vishwanathan), and Part-Time Members (Vedika Bhandarkar, Panja Pradeep Kumar, and Pradip Panalal Shah).
Banks Board Bureau First Chairman
The first Chairman of the Banks Board Bureau was Shri Vinod Rai, who held the position from 2016 to 2018.
Banks Board Bureau Quick Facts
- The BBB, formed in April 2016, operates as an autonomous recommendatory body.
- Its recommendations are considered by the Ministry of Finance, which holds the final decision-making authority.
- The BBB is responsible for recommending personnel for PSBs and directors in government-owned insurance companies.
- As of August 2020, Bhanu Pratap Sharma, the Former Secretary of the Department of Personnel & Training of the Government of India, serves as the Chairman.
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