Vinod Rai appointed chairman of BBB
The government appointed former Comptroller and Auditor General Vinod Rai as the first chairman of the Bank Board Bureau to help manage state-run banks better. The choice of chairman came under scrutiny with the Congress questioning the possible violation of Article 148(4) of the Constitution which states that the CAG cannot hold any official office after leaving service. The government has refuted the charges.
The creation of the Bank Board Bureau was announced by the Finance Minister to select directors of public sector banks. The BBB would be a 6 member body comprising of financial sector experts, former managing directors of banks, former bureaucrats, and industry experts. The Secretary, Department of Financial Services will head the BBB, which will become operational from 1 Apr 2016.
Currently, appointments to top banking positions are done by the government, which leads to allegations of conflicts of interest. Some experts also attribute this conflict of interest to the rising quantum of bad loans by banks, due to possible political interference in banks' lending operations. The BBB seeks to improve the appointment process in public sector banks and reduce corruption.
BBB is a part of the government's 7 pronged strategy 'Indradhanush', to revive the Public Sector Banks (PSBs). The 7 strategies include appointments, BBBs, capitalization, de-stressing of PSBs, empowerment, framework of accountability and governance reforms.
BBB will be a precursor to the Bank Investment Company (BIC) which will hold government's shares in public sector banks. The government is planning to bring down its stake in public sector banks through BIC, mooted by the Nayak committee on banking governance reforms. The BBB and later BIC will help in raising capital for banks to meet their capitalisation requirements.
The government is planning to use the expertise of industry stalwarts such as Ratan Tata, Narayan Murthy, Nina Lal Kidwai, etc. in the proposed Bank Board Bureau (BBB). The inclusion of industry experts in the BBB will provide greater credibility and expertise to the body. The BBB will replace the existing Appointment Boards to select public-sector banks' chairpersons and non-executive directors.
The Bank board bureau will have 6 members - 3 from the government and 3 experts. The 3 government members are RBI governor, secretary in the Department of Financial Services and secretary in the Department of Personnel and Training. The government is keen on completing the selection of the 3 expert members at the earliest to ensure that BBB is operational by 1st Apr'16.
