Centre steps in to protect PSU bankers taking 'genuine' commercial decisions

The Centre Tuesday stepped in to protect the risk-averse public sector lenders in taking genuine business decisions as the slowdown in bank lending to industry turned out to be a major reason for the current economic slump.

Now on, no managing director or CEO of a public sector bank will be personally held responsible for compliance in dealing with large value frauds committed by bank officials, a guideline for PSU bankers, said.

The other measures included setting up of a committee of senior officers by each bank to monitor the progress of pending disciplinary and internal vigilance cases.

Besides, the Centre also invoked Section 17-A of Prevention of Corruption Act, which requires prior permission before initiating investigation against a public servant, for the state-owned bankers.

Considering the complexities involved in the commercial decisions of managers in public sector firms, the Central Vigilance Commission has set up the Advisory Board for Banking and Financial Frauds (ABBFF) for a mandatory first-level examination on suspected frauds in excess of Rs 50 crore, involving public servants equivalent in rank to general managers and above, before enquiry or investigations begin.

“Procedural delay, on one hand, adversely affects the morale of the employees and, on the other, breeds inefficiencies in the system. Therefore, every Bank must set up a committee of senior officers to review pending disciplinary and internal vigilance cases and frame timelines to reduce delays in deciding such cases,” the guidelines issued by the finance ministry said.

The written rules come weeks after Prime Minister Narendra Modi acknowledged that there was a pressure on the banking system and the government would work to improve the situation.

He had assured that before any action was taken against bankers, scrutiny by serving finance or banking expert would be conducted and promised that his government would issue a guideline in that regard shortly.

The government's intervention comes after a series of rate cuts by the Reserve Bank of India and innumerable liquidity measures could not spur lending to industry by the PSU bankers for the fear of being hauled up even if their bona fide commercial decision go wrong.