Karol Bagh | IAS GS Foundation Course | date 26 November | 6 PM Call Us
This just in:

State PCS




News Analysis

Indian Economy

Financial Services Institution Bureau

  • 02 Jul 2022
  • 5 min read

For Prelims: Cabinet Appointments Committee, Financial Services Institutions Bureau, Banks Board Bureau (BBB), Public Sector Banks, Financial institutions

For Mains: Issues with Banks Board Bureau (BBB), Financial Services Institutions Bureau, Right to Information Act, 2005

Why in News?

The Cabinet Appointments Committee (ACC) has passed a government resolution to establish the Financial Services Institutions Bureau (FSIB) in place of the Banks Board Bureau (BBB).

  • The new framework was proposed by the Department of Financial Service, Ministry of Finance.

What is the Financial Services Institutions Bureau?

  • About:
    • The Financial Services Institutions Bureau will select the chiefs of public sector banks and insurance companies.
    • The FSIB will have the clear mandate to issue guidelines and select general managers and directors of state-run non-life insurers, general insurers and Financial Institutions.
      • FSIB will be the single entity for making recommendations for appointments of WTD (Whole-time Director) and NEC (Non-executive Chairman) in Public Sector Banks, India Private Limited company and Financial Institutions.
    • The Department of Financial Services shall first carry out necessary modifications in the Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 (as amended).
  • Chairman of FSIB: The ACC has approved the appointment of Bhanu Pratap Sharma as Initial chairperson of FSIB for two years. He was the former Chairman of BBB.

What are Public Sector Banks (PSB) ?

  • It is a bank in which the government holds a major portion of the shares.
    • Example, State Bank of India is a public sector bank, the government holding in this bank is around 60%.

What is Financial Institution (FI)?

What is the Banks Board Bureau (BBB)?

  • Background:
    • The Banks Board Bureau (BBB) has its genesis in the recommendations of ‘The Committee to Review Governance of Boards of Banks in India, May 2014 (Chairman - P. J. Nayak)’.
  • Formation:
    • The government, in 2016, approved the constitution of the BBB 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 an autonomous recommendation body.
    • The Banks Board Bureau was a public authority as defined in the Right to Information Act, 2005.
    • The Ministry of Finance has the final decision-making authority on the appointments in consultation with the Prime Minister’s Office.
  • Functions:
    • Apart from recommending personnel for the PSBs, the Bureau had also been assigned with the task of recommending personnel for appointment as directors in government-owned insurance companies.
    • 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.
  • Issues:
    • Delhi High Court had struck down the BBB’s power to select directors of Public Sector Undertaking, general insurance companies and the government has already implemented the verdict by cancelling all the appointments of the then serving directors who were selected by the BBB.
    • Delhi High Court in 2020 ruled that the BBB couldn’t select the general managers and directors of state-run general insurers, as it was not a competent body.
      • New India Assurance, the country’s largest general insurer, has been functioning without a regular CMD for almost 100 days.
      • The CMD post at Agriculture Insurance Company also fell vacant.

UPSC Civil Services Exam, Previous Year Questions

Q. The Chairmen of public sector banks are selected by the (2019)

(a) Banks Board Bureau
(b) Reserve Bank of India
(c) Union Ministry of Finance 
(d) Management of concerned bank

Ans: (a)

Source: IE

close
SMS Alerts
Share Page
images-2
images-2