FSIB: What is Financial Services Institutions Bureau?

As per the new framework of the Department of Financial Service, Ministry of Finance, the Bank Board Bureau (BBB) has been replaced with Financial Services Institutions Bureau (FSIB). Know more about FSIB here.

There are different financial services institutions in India. Banks and Insurance Companies are a few examples of financial institutions.

Who appoints the top posts like directors and chairpersons in the financial services institutions in India?

The answer is FSIB.

What is FSIB?

FSIB stands for Financial Services Institutions Bureau.

The Central Government has established the Financial Services Institutions Bureau with effect from July 1, 2022. The FSIB will serve the purpose of recommending persons for appointment as full-time directors and non-executive chairpersons on the Boards of financial services institutions.

Along with the responsibilities of appointment, guidance on a variety of other issues relating to personnel management in these institutions will also be provided.

Additionally, it would publish guidelines for selecting general managers and directors of general insurance companies in the public sector. While recruiting new employees for state-owned financial institutions is the board’s primary duty, it will also help state-run banks build their business plans and formulate business strategies.

The ACC has approved the appointment of Bhanu Pratap Sharma, the former Chairman of BBB as the initial chairperson of FSIB for two years.

Vision and Mission of FSIB

Search and choose the best candidates for the boards of public sector banks, financial institutions, and insurance companies. Then, suggest improvements to these institutions’ corporate governance.

To encourage the best corporate governance practices in financial institutions serving the public sector.

Functions of FSIB

• To recommend persons for appointment to the Boards of Directors of Public Sector Banks (PSB), Financial Institutions (FI), and Public Sector Insurers (PSI) as Whole-Time Directors (WTDs) and Non-Executive Chairpersons (NECs).
• To provide advice to the government on matters pertaining to the abovementioned directors’ nominations, transfers, extensions of their terms of office, and termination of their services.
• To provide advice to the government on the ideal management structure for PSBs, FIs, and PSIs at the board level.
• To provide guidance to the government on an effective system for WTDs and NECs in PSBs, FIs, and PSIs.
• To create a database with information about PSB, FI, and PSI performance.
• To provide advice to the government on the creation and implementation of ethics and conduct code for full-time directors in PSBs, FIs, and PSIs.
• To advise the government on developing acceptable management training and development programs for PSB, FL, and PSI personnel.
• To help PSBs, FIs, and PSIs build business plans and capital raising strategies, among other things.
• To carry out such a process and create a panel for consideration of the competent authority for any additional bank, financial institution, or insurer for whom the Government makes a reference – after consulting with the relevant regulator for that bank, financial institution, or insurer.

Composition of Financial Services Institutions Bureau

FSIB consists of a chairperson and members.

Chairperson

The Chairperson of FSIB is to be nominated by the Central Government. He shall be a retired official from the banking sector or a regulatory institution, a business person of repute with sufficient knowledge of the financial sector, or a person with at least 25 years of experience in public administration with experience in banking and the financial sector.

Members (ex-officio)

1. The Secretary in charge of the Department of Financial Services:
2. The Secretary in charge of the Department of Public Enterprises;
3. The Chairperson of the Insurance Regulatory and Development Authority of India (IRDAI), and if the office of the Chairperson is vacant, the senior-most whole-time member of IRDAI;
4. A Deputy Governor of the Reserve Bank of India (RBI);

Members (part-time, non-government)

Three persons with subject matter knowledge relating to PSBs and FIs, are to be nominated by the central government.

What is the need for Financial Services Institutions Bureau?

The Delhi High Court’s ruling last year that the BBB is not a competent body to select the general managers and directors of state-owned general insurers necessitated the amendments.

The Department of Financial Services has been asked by the Appointments Committee of the Cabinet (ACC) to make the necessary changes to the Nationalized Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 with the approval of the Finance Minister, and then notify the government resolution for creating the FSIB as a single entity to make recommendations for the appointments of full-time directors and non-executive chairman of banks and financial institutions.

Important Terms Related to FSIB

Know more about terms like Public Sector Banks, Financial Institutions, Public Sector Insurers etc.

Public Sector Banks (PSBs)

Public sector bank refers to and encompasses:

• The State Bank of India (SBI) established under the State Bank of India Act, 1955,
• each new bank created under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1955, or the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980,
• and any other bank to which the government may give notice that the FSIB shall perform the functions specified in such notice.

Financial Institutions (FIs)

Financial institutions include:

• National Bank for Agriculture and Rural Development (NABARD) established by the National Bank for Agriculture and Rural Development Act, 1981,
• National Housing Bank established by the National Housing Bank Act, 1987,
• Exim Bank of the Export-import Bank of India Act, 1981,
• Small Industries Development Bank of India established by the Small Industries Development Bank of India Act, 1989,
• IFCI Limited,

and any other lending institution in respect of which the Government may notify that FSIB shall perform such functions as may be specified therein.

Public Sector Insurer (PSI)

Public Sector Insurers include:

• Life Insurance Corporation of India (LIC) established by the Life Insurance Corporation Act, 1956
• General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972, and every acquiring company as defined in section 3 of the General Insurance Business (Nationalisation) Act, 1972 and
• Agriculture Insurance Company of India Limited.

About Bank Board Bureau (BBB)

It was an autonomous institution of the Indian government entrusted with finding suitable candidates for the boards of PSBs, public sector financial institutions, and public sector insurance companies as well as making recommendations for improvements to these institutions’ corporate governance.

In order to choose the CEOs and Executive Directors of public sector banks, the BBB was initially established in 2016.

The Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1980 was amended in 2016, and the 2016 notification by the Central Government provided the legislative framework for the BBB’s structure and functions.

Afterwards, the government gave BBB the responsibility of choosing the heads of insurance companies.

The PJ Nayak Committee’s recommended governance reforms in PSBs are being progressed by the BBB.

Delhi HC declared BBB incompetent and struck down the powers of the Banks Board Bureau as they found something wrong with the selection process.

The government has finally approved the FSIB, therefore for the recruitment of the heads of insurance companies.

Article Written By: Priti Raj