The newly-constituted Financial Services Institutions Bureau (FSIB) — a single autonomous professional body— will develop its own appropriate methodology to search and recommend high calibre persons for appointment as whole-time directors (WTDs) and non-executive chairpersons (NEC) in public sector banks (PSBs), public sector insurers (PSI) and financial institutions (FIs).

Until this mechanism is developed, FSIB will apply the mechanism hitherto adopted by the erstwhile Banks Board Bureau (BBB), which has now been subsumed into the newly-created body, sources said.

The newly-created FSIB has a much broader remit than BBB, they said, adding that the scope of FSIB functioning has now been extended by the Centre to PSIs, FIs besides PSBs.

Not only will FSIB recommend persons for appointment on the Boards of PSBs, FIs and PSI, this professional body will  advise the government on extension of terms and even termination of services for WTD, NEC across public sector entities in financial services institutions.

Appraisal system

FSIB will also recommend a suitable performance appraisal system for WTDs and NECs in PSBs, FIs and PSIs, sources said. 

With the government passing the resolution for the creation of FSIB, the erstwhile BBB ceases to exist. All the assets, interests and liabilities of the BBB now stand transferred to the FSIB, they added.

The 11-member FSIB will also advise the government on formulation and enforcement of a code of conduct and ethics for Wholetime directors and NECs in PSBs, FIs and PSIs. It will also build a databank containing data related to the performance of PSBs, FIs and PSIs. FSIB will also help PSBs, FIs and PSIs in developing business strategies and capital raising plans, sources said.

The FSIB will advise the government on the desired management structure at the Board level for PSBs, FIs and PSIs. 

Training programmes

The new professional body will also advise the government on evolving suitable training and development programmes for management personnel in PSBs, FIs and PSIs.

It maybe recalled that Centre had set up the BBB in April 2016 to search and select personages for the Board of PSBs. The Department of Financial Services (DFS) had later extended scope of BBB to cover even public sector insurers. However, this got into a legal challenge on the insurance sector front where it was argued that BBB should only focus on banks and had no legal mandate to cover public sector insurance related appointments ( for instance name BBB denotes only banks, thus this body should only focus on banks). 

With the Court also taking a view that BBB cannot cover insurance sector appointments, the Centre has now overhauled the framework and introduced a single entity FSIB to cover public sector banks, insurers and financial institutions.

“The intent to broad base the scope of the institution to now include all financial entities under GoI control is a good one. It could help with ensuring that government owned banks, insurance entities, DFIs will always have requisite CEOs, KMPs, board members with board committees adequately represented. It could additionally bring in newer skill sets and proactively address availability of a human capital pool for these financial institutions,” Srinath Sridharan, Corporate Advisor, told BusinessLine.

This task won’t be an easy one, considering that each of the entity might have a different organisational capability, ethos, core market strength, organisation culture, etc, Sridharan said.

A former chief executive of a PSB said the FSIB is certainly not “old wine in a new bottle” and could pave the way for board level performance improvements in PSBs. This FSIB could turn out to be a “super NRC”, said a banking industry observer. Nomination and Remuneration Committee (NRC) plays a critical role in the selection of Board members in Corporates.

FSIB composition

FSIB has 11 persons including the Chairperson, who will be nominated by the Centre. Bhanu Pratap Sharma, former Secretary of Department of Personnel & Training (DoPT) has been appointed as initial Chairperson of FSIB for two years.

Department of Financial Services (DFS) Secretary , Department of Public Enterprises ( DPE) Secretary and IRDAI Chairperson are members (ex-officio) for FSIB. 

While three persons with subject matter knowledge relating to PSBs and FIs will be nominated as part-time members, three persons with subject matter knowledge relating to PSIs are to be nominated as part time members on the insurance front.A Deputy Governor of Reserve Bank of India (RBI) will be an ex-officio Member.

The initial Chairperson and Members appointed include Animesh Chauhan (former Chairman and Managing Director of Oriental Bank of Commerce); Shailendra Bhandari ( formerMD&CEO of ING Vysya Bank) and Deepak Singhal ( former ED, RBI)— all three Members for PSBs and FIs.

On the public sector insurance front, the Centre has nominated Usha Sangwan (former Managing Director of LIC); A V Girija Kumar ( former Chairman and Managing Director of Oriental Insurance Company) and Sujay Banerji ( former IRDAI member) as Members.

Funding FSIB

For each financial year, the funds to be contributed by each of the three categories of financial service institutions (namely, PSBs, FIs and PSIs) towards meeting expenditure by FSIB would be reckoned in proportion to the total number of their respective vacancies of WTDs and NECs at the beginning of the financial year. . 

The DFS has said that FSIB would assess its total fund requirement for a particular financial year and apportion it among PSBs, FIs and PSIs in a specified manner and intimate the apportioned requirement to SBI in respect of PSBs, Nabard in respect of FIs, and LIC in respect of PSIs. SBI, NABARD and LIC would remit upfront the funds to be contributed by PSBs, FIs and PSIs, respectively, and collect the contributions of individual PSBs, FIs and PSIs, as the case may be, the DFS has said.

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