PSBs Current Affairs

Align pay in PSBs to that in CPSEs: BBB

The Bank Board Bureau (BBB) has recommended that Government should bring in reforms in the compensation process in public sector banks (PSBs) on the lines of Central Public Sector Enterprises (CPSEs).

BBB has suggested compensation reforms in PSBs so that best practices can be introduced ‘on the lines already prevalent in CPSEs.

It will play important role in attracting high-quality talent for non-executive directors and chairmen.  It will also maintain a level-playing field with the private sector with respect to role, responsibility and remuneration.

About Bank Board Bureau (BBB)
  • BBB is the super authority (autonomous body) of eminent professionals and officials for public sector banks (PSBs). It had replaced the Appointments Board of Government.
  • It is set up in April 2016 as part of seven point Indradhanush Mission to revamp the Public Sector Banks (PSBs).
  • Functions: Give recommendations to Government for appointment of full-time Directors as well as non-Executive Chairman of PSBs.
  • Give advice to PSBs in developing strategies for raising funds through innovative financial methods and instruments to deal with stressed assets.
  • Guide banks on mergers and consolidations and also ways to address the bad loans problem and among other issues.
  • Composition of BBB: It has three ex-officio members and three expert members, in addition to the Chairman. Former Comptroller and Auditor General (CAG) Vinod Rai is first and incumbent Chairman of BBB.

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Union Cabinet approves merger of SBI, 5 associate banks

The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the merger of State Bank of India (SBI) with five of its associate/subsidiary banks.

These five subsidiary banks are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

The Union Cabinet also approved the introduction of a Bill in Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959 and the State Bank of Hyderabad Act, 1956. 

Key Facts
  • The acquisition under Section 35 of the SBI Act, 1955 will result in the creation of a stronger merged entity. It will minimize vulnerability faced by subsidiary banks to any geographic concentration risks.
  • It will improve operational efficiency and economies of scale resulting into in improved risk management and unified treasury operations. Existing customers of associate banks will benefit from SBI’s global network.
  • The merger will lead to better management of high value credit exposures through focused monitoring and control over cash flows rather than separate monitoring by six different banks.
  • The merger will also result in recurring savings, estimated at more than Rs. 1,000 crore in first year, because of reduced cost of funds and enhanced operational efficiency.
Comment

The acquisition of subsidiary banks of SBI is considered an important step towards strengthening the banking sector through consolidation of public sector banks (PSBs). It is in pursuance of the Indradhanush action plan of the Central Government. In 2015, SBI was ranked 52 in the world in terms of assets, however the merger will allow its entry un top 50. The merger does not include Bharatiya Mahila Bank (BMB) and its proposal is still under consideration.

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