Bank Board Bureau(BBB) recast into Financial Services institutions Bureau(FSIB)

The Prime Minister, in 2016, approved the constitution of BBB as a body of eminent professionals and officials to make recommendations for appointment of whole-time directors as well as non-executive chairpersons of public sector banks (PSBs) and state-owned financial institutions.
It was also entrusted with the task of engaging with the board of directors of all PSBs to formulate appropriate strategies for their growth and development.
The government has transformed the Banks Board Bureau (BBB), the headhunter for directors of state-owned banks and financial institutions, into Financial Services Institutions Bureau (FSIB) by making some amendments.
The amendments were required as the Delhi High Court in its order last year said the BBB is not a competent body to select the general managers and directors of state-owned general insurers.
The Appointments Committee of the Cabinet (ACC) has asked the Department of Financial Services to carry out necessary modifications in the Nationalized Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 with the approval of Finance Minister, and then notify the government resolution for establishing FSIB as a single entity for making recommendations for appointments of whole time directors and non-executive chairman of banks and financial institutions.

What is the Financial Services Institutions Bureau (FSIB)? 

1. It’s a government body set up under the Department of Financial Services. The board will be entrusted with making recommendations for the appointment of full-time directors and non-executive chairman of state-run financial services institutions.
2. It would also issue guidelines for selecting general managers and directors of public sector general insurance companies. While its main task is to play the role of head-hunter for the state-owned financial services entities, the board will also be involved in formulating and developing business strategies for state-run banks and help them in their fund-raising plans. 

Why has it replaced the Banks Board Bureau (BBB)? 

1. The BBB was declared an incompetent authority last year by the Delhi High Court, when a general manager at state-owned National Insurance Company challenged the appointment of a person junior to him for Director’s position by the BBB. Consequent to the order, 10–11 directors appointed by the BBB had to vacate office.
2. To end this logjam, the BBB had to be struck down and a new body, namely, FSIB had to be put in place via approval from the Appointments Committee of the Cabinet, headed by the prime minister.

What is FSIB’s mandate? 

1. The primary role of FSIB is to identify manpower capabilities and ensure proper selection of talent for senior positions at financial institutions owned by the government. However, when BBB was brought into force in April 2016, it was envisaged as a body that would efficiently corporatise and make government entities function like private players, but it didn’t make much headway on that front.
2. With FSIB, the intent is to go beyond the man-manager role and assist the government in formulating a code of conduct and ethics for whole-time directors in these entities. It would also monitor and assess the performance of public sector banks, government-owned financial institutions and insurance companies.  

How were senior bank officials appointed before BBB? 

Promotions and recruitments happened at the will and mercy of the government. The BBB, and now the FSIB, aim to prevent such red-tape and promote people based on merit.

How critical is the role of FSIB? 

1. When BBB was brought into action, there was consolidation within public sector banks, first with Bank of Baroda in 2018 and then a year later with 10 PSU banks. Again, there could be another round of bank mergers and privatisation of both banks and insurance companies.
2. The criticism often surfacing is whether PSU entities are ready to withstand the test of privatisation from an operations and management perspective — and this has a deep nexus with the efficiencies of manpower at all layers. Therefore, the silent mandate of FSIB would be to ready banks and insurance companies for the privatisation process and undertake the necessary clean-up/HR upliftment practices. 

Who heads the new entity, and who are its members? 

FSIB would be headed by a chairman, a central government nominee. The board would comprise the Secretaries of the DFS, the chairman of IRDAI, and a deputy governor of the RBI. Additionally, it will have three part-time members who are experts in banking and three more from the insurance sector.

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