Govt puts more onus on PSB boards over big-ticket frauds
The boards of public sector banks and not its MDs and CEOs would be held accountable for the various regulator-prescribed timelines for reporting or investigating frauds above Rs 50 crore, according to a directive sent by the finance ministry to banks. It also asked banks to set up a panel to monitor the progress of disciplinary and internal vigilance cases against bankers.
January 29, 2020, 12:10 IST
In another move to allay fears of honest bankers in taking big commercial decisions, the government has said that heads of public sector banks will no longer be personally responsible for compliance with various timelines that have been laid down for large value frauds.
"The government has now modified its 2015 framework on large value frauds doing away with the personal responsibility of the managing directors and chief executive officers of public sector banks (PSBs) for compliance with various prescribed timelines," the ministry said.
More responsibility
The boards of PSBs would have to put in place a mechanism for ensuring compliance of the various timelines laid down in Reserve Bank of India (RBI) and Central Vigilance Commission (CVC) circulars. According to the May 13, 2015 notification of the finance ministry, the overall responsibility for ensuring compliance with the various timelines on bank chiefs.
The finance ministry also told banks to set up a panel to monitor the progress of disciplinary and internal vigilance cases against bankers. "Government has separately directed banks on 27 January to set up a committee of senior officers to monitor progress of pending disciplinary and internal vigilance cases as procedural delays, on one hand, adversely affect the morale of employees and, on the other, breeds inefficiencies in the system," the ministry said on Tuesday.
The move comes close on the heels of a revamp of the framework under the Central Vigilance Commission (CVC) that mandates that all big suspected bank fraud cases have to be vetted by a panel before investigating agencies such as the Central Bureau of Investigation (CBI) can initiate action.
The three Cs
Finance minister Nirmala Sitharaman sent a strong message to banks to lend without fear of the 'three Cs' a meeting last month which was also attended by the CBI director. The 'three Cs' refer to the CBI, Comptroller and Auditor General of India and the CVC. Sitharaman also assured bankers that a distinction would be made between genuine commercial failure and deliberate wrongdoing.
The release said the move was part of government efforts to "protect honest commercial decisions" taken by bankers and distinguish between genuine commercial failures and culpability."
The DFS has also directed that all nonperforming asset (NPA) accounts exceeding Rs 50 crore at PSBs be initially referred to the Advisory Board for Banking and Financial Fraud (ABBFF) set up by the CVC for preliminary examination before launching enquiries or investigations.
This move brings the DFS guidelines in line with those set by the CVC. The DFS had in 2018 mandated that PSB's check all NPAs over Rs 50 crore for fraud.
The release noted that the government had taken several steps to protect honest commercial decisions by bankers including the incorporation of Section 17A in the Prevention of Corruption Act which requires prior approval from the government before the initiation of an investigation against a public servant.
Finance Ministry
bank frauds