In Brief: PJ Nayak Committee and Banks Board Bureau (BBB)

Headline : BBB tags 75 officers for leadership roles in PSBs

Details :

The News:

• The Banks Board Bureau (BBB) has recently identified 75 senior officers for leadership roles in Public Sector Banks (PSBs).
• The BBB also gave its recommendations in key areas that needed to be strengthened besides improvising governance practices among PSBs.

 

About Banks Board Bureau (BBB)

• In 2016, the Banks Board Bureau (BBB) was constituted and started functioning as an recommendatory body.
• It is an autonomous body, constituted to:
  • Improve the governance of Public Sector Banks
  • Recommend selection of chiefs of government owned banks and financial institutions
  • To help banks in developing appropriate strategies for their growth and development and capital raising plans

• It is a step towards governance reforms in Public Sector Banks (PSBs) as recommended by J. Nayak Committee.
• The BBB was also the part of Indradhanush Plan of the government.

 

PJ Nayak Committee

• The Nayak committee had recommended a three-phased reform in PSBs:
  1. Formation of a Banks Board Bureau (BBB)
  2. Holding company of PSBs
  3. Empowering and strengthening the boards

 

News Summary: BBB has give its recommendations in line with the recommendations of the PJ Nayak Committee. These are:

• Autonomy to banks to decide organisational structure: Respective bank boards be empowered to decide the organisation structure and deployment depending upon needs and strategy of each PSB.
• Rationalizing the composition and mandate of the board: The Bureau suggested rationalizing the number, composition and mandate of the committees of the Board across PSBs.
• Revamping Credit governance: BBB recommended appointing a Risk Management Committee (RMC) and revamping credit governance architecture in nationalised banks to reinforce efforts to minimise credit costs and enhance efficiency of credit allocation.
• Performance based compensation: Incentivise maximisation of risk-adjusted income and disincentivise operational inefficiencies by introduction of a performance-based compensation through Employee Stock Option Scheme.