Centre issues norms to protect bankers when bonafide decisions go wrong

The framework, dated October 29, gives detailed SOPs to be followed for different categories of NPAs, depending on the amount

Seeking to protect honest bank employees, the government has come out with the 'staff accountability framework' under which officers concerned will not be hauled up in case bonafide decisions involving loans up to Rs 50 crore go wrong.

The framework will cover only genuine decisions and not those involving malfeasance or malafide intentions, according to the norms issued by the finance ministry.

It specifies details and the procedures to be followed for scrutinising such acts of omission and commission on the part of bank officials concerned. To save them from unnecessary hassle, the framework also provides for the resolution of such cases against bankers.

"Banks must initiate and complete staff accountability exercise within six months from the date of classification of the account as NPA," the ministry said.

In the past, several senior bankers have been arrested in loan default cases. The latest being the arrest of former SBI Chairman Pratip Chaudhuri in a case where the loan turned into a Non-Performing Asset (NPA).

The fear of 3Cs -- Central Bureau of Investigation (CBI), Central Vigilance Commission (CVC) and Comptroller and Audit General (CAG) -- often prevented bankers from taking commercial decisions which have a probability of going bad. The government and other stakeholders are taking steps to dispel the fears.

The framework, dated October 29, gives detailed Standard Operating Procedures (SOPs) to be followed for different categories of NPAs, depending on the amount.

As per the guidelines, these accounts have been divided into three categories -- NPA up to Rs 10 lakh, Rs 10 lakh - Rs 1 crore and accounts above Rs 1 crore up to Rs 50 crore.

In NPA accounts having total outstanding above Rs 50 crore, staff accountability is to be examined as per extant guidelines, it said.

Commenting on the framework, Punjab & Sind Bank Managing Director S Krishnan said it is a well-drafted framework and it will go a long way in instilling confidence in bankers.

The guidelines will help push credit growth as it helps to dispel doubts from the minds of bankers, he said.

However, he said the arrest of the former SBI Chairman will definitely bring down the morale of bankers.

According to reports, former Chairman Pratip Chaudhuri was arrested on Sunday by the Jaisalmer Sadar police from his Delhi residence in an alleged loan default case.

The guidelines on staff accountability framework for NPA accounts up to Rs 50 crore (Other than Fraud Case) have been finalised in consultation with Central Vigilance Commission, it said.

The banks have been asked to modify their existing guidelines and implement the framework for accounts turning NPAs on or after April 1, 2022.

Once the case is referred, the audit vertical may rely upon the audit report of the previous four years as well as other investigation or inspection reports like branch inspection reports, special reports and credit process audits.

"If during the above period of four years, available information is not sufficient, the designated vertical may call for additional information from a branch or controlling office etc or may collect the same itself," it said.

It also emphasised the need to strengthen the internal audit system with adequate manpower and technical support.

Observing that a growing economy depends heavily on bank credit, the ministry said the government and RBI have on various occasions expressed their concern on slow credit offtake and have stressed eradication of fear in taking business decisions.

The aim of this framework is to protect employees for their bonafide action and at the same time make them accountable for any wrongdoing or any inaction on their part, it said.

Staff accountability is also required to identify and punish only those employees who are prima facie responsible for the lapses of non-compliance with laid down systems and procedures or due to non-adherence to norms, it noted.

The motive of the staff accountability is not to discourage the exercise of initiative and decision making, the ministry said, adding that the bank's approach for staff accountability should be to instil confidence amongst the officials for decision making and to examine the reasons for the account turning into NPA and for non-recoverability of bank funds.

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