Recruiting Directly at Board Level: Newly Created FSIB Gets a Wider Canvas to Play in the Public Sector Financial Services Space

The newly formed Financial Services Institutions Board (FSIB) – a unique self-governing professional body – will develop its own appropriate methodology to seek out and recommend high caliber individuals for appointment as full-time directors (WTDs) and chairpersons not (NEC) in Public Sector Banks (PSB), Public Sector Insurers (PSI) and Financial Institutions (FI).

Until this mechanism is developed, the FSIB will apply the mechanism adopted so far by the former Banks Board Bureau (BBB), which has now been incorporated into the newly created body, sources said.

The newly created FSIB has a much wider mandate than the BBB, they said, adding that the scope of operation of the FSIB has now been extended by the Center to PSIs, FIs in addition to PSBs.

Not only will the FSIB recommend individuals for appointment to the boards of PSBs, FIs and PSIs, but this professional body will advise the government on extending terms and even terminating services for WTD, NEC in sector entities public of financial services institutions.

Rating system

The FSIB will also recommend an appropriate performance appraisal system for WTDs and NECs in PSBs, FIs and PSIs, sources said.

With the adoption by the government of the resolution for the creation of the FSIB, the old BBB ceases to exist. All assets, interests and liabilities of the BBB are now transferred to the FSIB, they added.

The 11-member FSIB will also advise the government on the formulation and application of a code of conduct and ethics for full-time administrators and NECs of PSBs, FIs and PSIs. It will also constitute a database containing data relating to the performance of PSOs, FIs and ISPs. The FSIB will also help PSBs, FIs and PSIs develop business strategies and capital raising plans, sources said.

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

Training programs

The new professional body will also advise the government on the development of appropriate training and development programs for the management staff of PSBs, FIs and PSIs.

It may be recalled that the Center had created the BBB in April 2016 to seek and select personalities for the PSB Council. The Department of Financial Services (DFS) then extended the scope of BBB to cover even public sector insurers. However, this led to 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 insurance-related appointments in the public sector. (for example, the name BBB refers only to banks, so this organization should only focus on banks).

As the Court is also of the view that BBB cannot cover appointments in the insurance sector, the Center has now revised the framework and introduced a single entity FSIB to cover public sector banks, insurers and financial institutions.

“The intention to widen the scope of the institution to now include all financial entities under the control of the Government of India is good. This could help ensure that public banks, insurance entities and DFIs will always have the CEOs, KMPs, board members required with appropriately represented board committees This could further bring in new skills and proactively address the availability of human capital pool for these institutions financials,” said Srinath Sridharan, Corporate Advisor. Activity area.

This task will not be easy, since each of the entities may have an organizational capacity, a philosophy, a market force, an organizational culture, etc. different, 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 performance improvements at PSB board level. This FSIB could turn out to be a “super NRC”, believes a banking sector observer. The Nomination and Remuneration Committee (NRC) plays a key role in the selection of members of companies’ Boards of Directors.

Composition of the FSIB

The FSIB has 11 people, including the president, who will be appointed by the Centre. Bhanu Pratap Sharma, former secretary of the Department of Personnel and Training (DoPT) has been appointed as the initial chairman of the FSIB for two years.

The Secretary of the Department of Financial Services (DFS), the Secretary of the Department of Public Enterprises (DPE) and the President of IRDAI are members (ex officio) of the FSIB.

While three persons with subject matter knowledge regarding PSBs and FIs will be appointed as part-time members, three persons with subject matter knowledge regarding PSIs shall be appointed as part-time members on the Frontline. insurance. A Deputy Governor of the Reserve Bank of India (RBI) will be an ex officio member.

The initial chairman and appointed members include Animesh Chauhan (former Chairman and CEO of Oriental Bank of Commerce); Shailendra Bhandari (former MD&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 Center has appointed Usha Sangwan (former managing director of LIC); AV Girija Kumar (former President and CEO of Oriental Insurance Company) and Sujay Banerji (former member of IRDAI) as members.

FSIB financing

For each financial year, the funds to be contributed by each of the three categories of financial services institutions (i.e., PSOs, FIs and ISPs) to cover the expenses of the FSIB would be calculated in proportion to the total number of their vacancies. respective WTD and NEC at the start of the year. .

The DFS stated that the FSIB would assess its total need for funds for a particular financial year and allocate it among the PSBs, FIs and PSIs in a specified manner and report the allocated need to the SBI with respect to the PSBs, Nabard with respect to FIs and LICs. as far as ISPs are concerned. The SBI, NABARD and LIC would pre-distribute funds to be contributed by the PSBs, FIs and PSIs respectively, and collect contributions from individual PSBs, FIs and PSIs, as appropriate, the DFS said.

Published on

July 10, 2022

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