P J Nayak Committee – Indian Economy UPSC Notes
January 2014, the P J Nayak Committee was formed to suggest ways to improve how public sector banks are governed. It submitted its report in May 2014.
P J Nayak Committee Background Public Sector Banks (PSBs) like SBI and PNB are owned by the government because of laws like the State Bank of India Act, 1955 and the Bank Nationalization Act, 1970 . These laws require the government to have a majority share in these banks, meaning it can appoint their board members and control decisions. However, this created problems: The government often appointed people based on political connections rather than banking expertise. Political interference led to bad decisions, corruption, and financial mismanagement. To fix this, in January 2014, the P J Nayak Committee was formed to suggest ways to improve how public sector banks are governed. It submitted its report in May 2014 . Key Recommendations of the P J Nayak Committee 1. Creation of a Bank Investment Company (BIC) The government should set up BIC to hold its shares in all PSBs. Instead of the government directly owning PSBs, BIC would be the owner . PSBs would become limited companies (e.g., SBI → SBI Li…