UPSC Prelims 2022 Q64: Banks Board Bureau (BBB) — Explained
With reference to the 'Banks Board Bureau (BBB)', which of the following statements are correct?
1. The Governor of RBI is the Chairman of BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital raising plans.
Select the correct answer using the code given below:
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Answer: (b) 2 and 3 only
Statement-wise explanation
- 1: incorrect — The RBI Governor does not sit on the Banks Board Bureau (BBB), let alone chair it. The BBB had a separate chairperson. Its first chair was former Comptroller and Auditor General Vinod Rai (2016–2018), followed by Bhanu Pratap Sharma, a former Secretary of the Department of Personnel and Training. The RBI's only seat was ex-officio, held by a Deputy Governor. The other two ex-officio members were the Secretary of the Department of Financial Services and the Secretary of the Department of Public Enterprises.
- 2: correct — The BBB's main job was to recommend people for the top posts in public sector banks (PSBs) and state-owned financial institutions. These were the whole-time directors (MD & CEO and executive directors) and non-executive chairpersons. The government still made the final appointment through the Appointments Committee of the Cabinet. That is why the statement uses the word 'recommends'.
- 3: correct — The BBB's mandate went beyond appointments. It was also asked to help PSBs develop business strategies and capital-raising plans. It also advised on management structure, performance appraisal, codes of conduct and training. These tasks came from the Indradhanush reform plan of 2015, which wanted to move bank governance away from direct control by the ministry.
How to eliminate
Statement 1 is the one you can test with basic knowledge. The RBI Governor is the regulator of all banks, so it makes little sense for them to chair a government body that picks heads for one group of banks. Also, the RBI's seat on the BBB went to a Deputy Governor, not the Governor. Once you drop Statement 1, you drop every option that contains it, and only '2 and 3 only' is left. Statement 2 is the well-known core role of the BBB: selecting PSB chiefs. You only need to recall that Statement 3, help with strategy and capital raising, was also part of its mandate. If you remember one fact, remember this: the BBB was chaired by an independent professional, not by anyone from the RBI.
Know more
Banks Board Bureau (BBB) was one of the seven parts of the government's Indradhanush plan for reforming public sector banks (August 2015). It was approved in February 2016 and started work on 1 April 2016. It was set up by amending the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980. It was an autonomous recommendatory body. It could advise but not appoint. Its office was in the RBI's Byculla office in Mumbai.
| Feature | Banks Board Bureau |
|---|---|
| Started | 1 April 2016 |
| Chairperson | Independent professional (Vinod Rai 2016–18, then Bhanu Pratap Sharma) |
| Ex-officio members | Secretary, Dept of Financial Services; Secretary, Dept of Public Enterprises; a Deputy Governor of the RBI |
| Other members | Expert members, some from the private sector |
| Core role | Recommend whole-time directors and non-executive chairpersons of PSBs and financial institutions |
| Other roles | Strategy and capital-raising help, management structure, appraisal, codes of conduct, data bank of officers |
| Final appointing authority | Government (Appointments Committee of the Cabinet) |
The other Indradhanush parts: appointments, the BBB itself, capitalisation, de-stressing, empowerment, a framework of accountability (Key Performance Indicators), and governance reforms (the 'Gyan Sangam' retreats).
Successor: The Delhi High Court ruled that the BBB was not the competent body to select directors of state-run general insurers. After that, in 2022 the government replaced the BBB with the Financial Services Institutions Bureau (FSIB). The FSIB is a single body for recommending heads of PSBs, public sector insurers and financial institutions. Bhanu Pratap Sharma stayed on as chairperson.
In the news
In 2021–22 the BBB was in the news. A court had ruled against its power to select insurance-company directors, and the government was planning to overhaul it. This led to its replacement by the Financial Services Institutions Bureau in mid-2022. That said, the question tests only the BBB's static structure and mandate.
NCERT Concepts to Revise
- Public sector bank: The BBB's whole mandate covered government-owned banks, so the question needs a clear idea of what makes a bank a PSB.
- Bank recapitalisation: Statement 3 refers to capital-raising plans for PSBs, which is closely tied to how these banks raise fresh capital.