Revamp of Bank Board Bureau in the Backdrop of Rising NPAs

Bank Board Bureau was constituted as one of the components of Mission Indradhanush which is based on recommendations of P J Nayak Committee. The Bank Board Bureau was setup as an autonomous body by the central government to improve credit culture in India and aims to address rising cases of Non Performing Assets(NPAs) (termed as the “twin balance sheet problem” in the Economic Survey).

Functions of Bank Board Bureau

• Improving the governance of Public Sector Banks
• Recommending selection of chiefs of government owned banks and financial institutions
• Recognizing NPAs and wilful defaulters
• Helpingresolve and recover value from stressed accounts
• Developing innovative strategies to raise capital
• Guide banks on mergers and consolidations of stressed banks.
• Guide in rationalization and consolidation of foreign operations of Public Sector banks
• Help PSBs mobilize their non-core assets to strengthen their capital base
• Recognize fraud detection and initiate action in respect of NPAs

Way Forward

• Clear mandate and independent functioning of Bank Board Bureau needs to be ensured.
• Non interference of government in the selection process of heads of financial institutions
• Provide constitutional backing as well as institutional autonomy to solve rising cases of NPAs
• Ensure mergers and acquisitions of loss making PSBs
• Policy and structural issues of PSBs needs to be resolved