Bank Board Bureau: Government Proposes Replacement

Table of Contents

Bank Board Bureau UPSC: Relevance

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

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.

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.

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.

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.

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.

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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