Ending uncertainties over crucial appointments to state-run banks, general insurers and other financial institutions, the government has decided to set up the Financial Services Institution Bureau (FSIB) with a wider mandate to replace the Banks Board Bureau (BBB).
The BBB, which was entrusted with the task of selecting candidates for appointments to the senior management-level posts, has remained practically dysfunctional after the term of its chairman Bhanu Pratap Sharma and members ended on April 10.
The government was forced to replace the BBB with a new entity after the Delhi High Court had last year ruled that the BBB couldn’t select the general managers and directors of state-run general insurers, as it was not a competent body. Subsequently, at least half-a-dozen newly-appointed directors of non-life insurers had to vacate their positions. The FSIB, however, will have the clear mandate to issue guidelines and select general managers and directors of state-run non-life insurers, apart from other key executives of state-run banks, general insurers and financial institutions.
The Appointments Committee of the Cabinet (ACC) on June 30 approved a proposal by the department of financial services (DFS) to appoint former BBB chairman Sharma to head the new body for two years or until further orders. Sharma was at the helm of the BBB since 2018 until his term ended in April 2022.
The ACC also appointed three members of the new entity (FSIB) – Animesh Chauhan, former chairman and managing director of Oriental Bank of Commerce; Shailendra Bhandari, former managing director and chief executive of ING Vysya Bank; and former Reserve Bank of India executive director Deepak Singhal.
According to the latest ACC decision, the “department (DFS) shall first carry out necessary modifications in the Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 (as amended) with the approval of finance minister (Nirmala Sitharaman)”.
The DFS will then “notify the government resolution for establishing FSIB as a single entity for making recommendations” for the appointments of whole-time directors, non-executive chairmen in public sector banks (PSBs), state-run non-life insurance companies and other financial institutions.
This high court’s ruling on the BBB’s jurisdiction came on a case filed by National Insurance Company general manager Ravi, 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 had enabled the BBB to make such selections.
Consequently, the government has now decided to replace the BBB with the FSIB that would not just do the same job but also have a much larger, legally tenable mandate to carry out its functions without hiccups.