Appointment of Managing Director of Development Financial Institution
The Banks Board Bureau (BBB) may be entrusted with the job to select managing director (MD) and deputy managing directors (DMDs) of a proposed Rs 1 lakh crore development financial institution (DFI) being set up to accelerated infrastructure financing activities.
It is seen from the Union Budget 2021-22 that the Central Government will build long-term infrastructure to keep India’s economic growth rate stable.
Development Financial Institution (DFI):
- The National Bank for Financing Infrastructure and Development is the infrastructure financier.
- Development financial institutions provide long-term and low-rate loans for long-term capital-intensive investments, such as urban infrastructure, mining, heavy industry, and irrigation systems.
- It is a major hub for financing the ambitious National Infrastructure Pipeline(NIP) project.
- The first DFI in India began in the year 1948 with the establishment of the Industrial Finance Corporation of India (IFCI).
- However, during the 1970-80s, DFI got discredited for mounting non-performing assets, allegedly caused by politically motivated lending and inadequate professionalism in assessing investment projects for economic, technical, and financial viability.
- While the increase in NPAs at the time was reportedly due to politically motivated loan disbursements and insufficient professionalism in assessing investment projects for economic, technical and financial viability.
- These factors led to the Narasimha Committee (1991) recommending the dissolution of Development Financial Institutions (DFIs) and then active development financial institutions were converted into commercial banks.
- The present Government of India is going to start the development financial institution again.
Bank Board Bureau(BBB):
- In order to meet the challenges of the banking sector, a committee was formed in 2014 by the Governor of the Reserve Bank of India, Raghuram Rajan, headed by former Axis Bank Chairman PJ Nayak.
- On 28 February 2016, based on the recommendations of the PJ Nayak Committee, the Government of India approved the formation of the Bank Board Bureau as an autonomous body.
- Its function is to recommend the appointment of full-time directors and non-executive presidents of public sector banks (PSBs) and government financial institutions.
- The final decision on these appointments is taken by the Ministry of Finance, in consultation with the Prime Minister’s Office.
Functions of Bank Board Bureau:
- To make suggestions to the Government for appointment of Board of Directors (full-time Directors and Non-Executive Chairman) of Public Sector Banks and Financial Institutions.
- Creating a data bank on the performance of Public sector banks and other financial institutions as well as its officers and board of directors and share it with government.
- To advise the Government on the formulation of policy and code of conduct for the management personnel of public sector banks and financial institutions and, in the implementation of the same.
- Assisting banks for business planning and raising capital. Etc.
- The ‘Bank Board Bureau’ consists of a Chairman and three ex-officio members, namely, Secretary of the Department of Public Enterprises, Secretary of the Department of Financial Services and Deputy Governor of the Reserve Bank of India.
- In addition to this, the board also has five expert members, two of whom are elected from the private sector.
Source – PIB