financial-sector-regulatory-appointment-search-committee

Context: Key bodies such as the Reserve Bank of India (RBI) and the Telecom Regulatory Authority of India (TRAI), besides the State Bank of India (SBI), are set to have new people in top positions.

Vacancies in top posts

  • RBI’s deputy governor post became vacant after one of the four deputy governors, demitted office in March citing health reasons.
    • The central bank has four Deputy Governors of which two are appointed from outside — one, a commercial banker and the other, an economist.
    • The remaining two are promoted from within the RBI.
    • The Reserve Bank's affairs are governed by a central board of directors. 
      • The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. 
      • The Board consists of official directors, who include the Governor and up to four Deputy Governors, non-official directors, who include up to ten directors from various fields and two government officials, and one director from each of four local boards of the RBI.
  • Searching for a new chairman for Telecom Regulatory Authority of India (Trai), as the current chairman, is expected to demit office on 30 September.
  • The Banks Board Bureau recommended the elevation of SBI’s managing director Dinesh Kumar Khara as the chairman of the country’s largest lender SBI. 

The appointment process

  • The Financial Sector Regulatory Appointment Search Committee, comprising the cabinet secretary, RBI governor, and the financial services secretary, interviewed the candidates for the post. 
  • As per the process, the panel will invite applications from eligible candidates and based on interactions with them will select the candidate.
  • The appointment would be made by the central government on the recommendation of the FSRASC. 
  • It is noted that the FSRASC is free to identify and recommend any other person also, on the basis of merit, who has not applied for the post.

Significance of the appointments 

  • The responsibility of financial regulation falls on the now vacant post of deputy governor.
  • The TRAI chairman’s appointment is related to the policies governing the telecom sector are likely to have a bearing on the trajectory of India’s economic recovery.

Financial Sector Regulatory Appointment Search Committee

  • FSRASC was set up based on the recommendation of the Financial Sector Legislative Reforms Commission as a “standing committee” to “recommend suitable persons for selection of Chairperson and Whole Time and Part Time Members of the financial sector regulators.”
  • The Finance Ministry’s objective was to adopt a uniform selection process for all financial sector regulators without going into the related issues of tenure, age and qualification.
  • Apart from the Cabinet Secretary, who heads it, it includes 
    • Additional Principal Secretary to the Prime Minister; 
    • Secretary, Department of Economic Affairs or Department of Financial Services (depending on the administrative role); 
    • Chairperson of the regulatory authority concerned, and 
    • Three outside experts.

Telecom Regulatory Authority of India (TRAI) 

  • It was established by an Act of Parliament, to regulate the telecommunication services. 
  • It consists of one Chairperson, two full-time members and two part-time members.
  • Some of the major recommendatory, regulatory and tariff setting functions of TRAI are to make recommendations on the need and timing for introduction of a new service provider, on the terms and conditions of license to a service provider among others.

Banks Board Bureau (BBB)

  • Formed as part of Mission ‘Indradhanush’ — a seven-point revamp programme for state-owned banks — the board was to act as a link between public sector banks (PSBs) and the government.
  • Its main task was to reinvent PSBs, make them more efficient, chalk out a merger strategy and roll out a well-constructed talent policy with revised salary structure and employee stock option plan (ESOP). 
  • The role of the BBB is also in selection of chairmen and other senior officials of the bank boards.
  • According to a Reserve Bank of India (RBI) recommendation, the BBB was also to be morphed into Bank Investment Company (BIC), which was envisaged as the holding company for PSBs.
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