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).

Components of Mission Indradhanush

  • De-stressing PSBs and the infrastructure sector
  • Capitalization, to meet BASEL- III norms
  • Institutional Empowerment
  • Framework Accountability
  • Governance reforms in PSBs
  • Banks Board Bureau
  • Appointments, separation of posts of CEO and MD of banks

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