Financial Services Institutions Bureau (FSIB)

In news- The Appointments Committee of the Cabinet has recently approved a government resolution(proposed by Department of Financial Services) for establishing the FSIB in place of the Banks Board Bureau (BBB).

Why amendments/changes?

The Delhi High Court in its order in 2021 had said that the BBB is not a competent body to select the general managers and directors of state-owned general insurers.

About Financial Services Institutions Bureau (FSIB)-

It will advise the government on a suitable performance appraisal system for whole-time directors and non-executive chairmen of the state-run financial services institutions.

It will build a data bank relating to the performance of public-sector banks (PSBs), Financial Institutions(FIs) and insurance companies.

It will advise the government on “formulation and enforcement of a code of conduct and ethics for whole-time directors” in these institutions.

It will even help these state-run banks, Financial Institutions and insurers in developing business strategies and capital raising plans, etc

The FSIB will now select the chiefs of public sector banks and insurance companies.

These functions will be in addition to its role in recommending candidates for appointment as whole-time directors and non-executive chairpersons of PSBs), FIs and public-sector insurers (PSI).
The FSIB will comprise of-
- A chairperson nominated by the central government.
- The secretaries of the departments of financial services and public enterprises.
- The chairman of the Insurance Regulatory and Development Authority of India and
- A deputy governor of the Reserve Bank of India (RBI).
- Apart from them, there will be three members with knowledge of banks and other financial institutions, and three more with knowledge of insurance.
Former BBB chairman Bhanu Pratap Sharma has been selected to head the FSIB for two years or until further orders.

In future, the FSIB chairman and the three members handling affairs relating to banking and financial institutions will be selected by a search committee that will comprise the governor of the RBI and the secretaries of the departments of financial services and personnel and training.
Similarly, the part-time members relating to the insurance sector would be chosen by the chairman of the IRDAI and the secretaries of the departments of financial services and personnel and training.
To avoid conflict of interest, the part-time members shall be either retired or, if working, be required to discontinue work.
Further, such members shall have no commercial relationship with any commercial entity that has commercial relationship with any PSB or FI or PSI, and the central government may consult the regulator concerned in this regard.
The FSIB chairperson and part-time members will get a fee of Rs 50,000 per sitting.
FSIB shall be a professional body with autonomy in its affairs and shall have its own secretariat.
It may appoint a person, or take on deputation from RBI a person in the rank of chief general manager or general manager in RBI, to act as full-time secretary of its secretaria.

Banks Board Bureau (BBB)-

It is an autonomous body of the Government of India tasked to Search and Select apposite personages for Board of PSBs, Public Sector Financial Institutions and Public Sector Insurance Companies and recommend measures to improve Corporate Governance in these Institutions.
The BBB was originally set up in 2016 to select the CEOs and Executive Directors of public sector banks.
Central Government notified the amendment to the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980 providing the legal framework for composition and functions of the BBBin 2016.
However, the government later entrusted BBB to select the chiefs of insurance companies.
With the government now clearing the FSIB, the selection process of chiefs of insurance firms is expected to take place in the coming days.

The BBB works as step towards governance reforms in PSBs as recommended by P.J. Nayak Committee.

The mandate of the Bureau includes-

To recommend the selection and appointment of Board of Directors in Nationalised Banks, Financial Institutions and Public Sector Insurance Companies (Whole Time Directors and Chairman).
To advise the Central Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Directors of mandated institutions.
To advise the Central Government on the desired management structure of mandated institutions, at the level of Board of Directors and senior management.
To advise the Central Government on a suitable performance appraisal system for mandated institutions.
To build a data bank containing data relating to the performance of mandated institutions and its officers.
To advise the Central Government on the formulation and enforcement of a code of conduct and ethics for managerial personnel in mandated institutions.
To advise the Central Government on evolving suitable training and development programs for managerial personnel in mandated institutions.
To help the banks in terms of developing business strategies and capital raising plan and the like any other work assigned by the Government in consultation with Reserve Bank of India.