Govt sets up board to examine bank frauds of at least Rs 50 crore before agencies step in

india

Updated: Jan 17, 2020 03:29 IST

The government has constituted a five-member Advisory Board to vet all alleged frauds of a magnitude of at least Rs 50 crore in state-run banks and public financial institutions before these are referred to investigative agencies such as the Central Bureau of Investigation (CBI) in a move aimed at distinguishing honest business decisions of bankers from the not-so-honest ones.

The formation of the board was announced in an order issued by the Central Vigilance Commission (CVC) on Wednesday.

The move is in lines with Prime Minister Nadrendra Modi’s assertion at the 17th Hindustan Times Leadership Summit on December 6 where he encouraged bankers take “genuine business decisions” without fear and said that the government would shortly create a framework that would bring banks under a protective umbrella to enable effective decision-making.

There has been concern in banking and business circles that the fear of prosecution was preventing bankers from taking calls on loans, thereby curtailing access to credit to companies.

According to the order on the “Framework for Advisory Board”, the body will act as a “first-level of examination” in respect of officers in the rank of general managers (GMs) and above.

State-owned banks and public financial institutions will initiate action in cases of alleged frauds only after obtaining the advice of the board, the order issued by the apex vigilance institution of the central government said.

The five-member board will be headed by former vigilance commissioner TM Bhasin. Its other members are former urban development secretary Madhusudan Prasad, former director general of the Border Security Force (BSF) DK Pathak, and the former managing director and chief executive officer of Andhra Bank, Suresh N Patel. The board will have one nominated member from the financial sector, according to the order. The tenure of the chairperson and members will be for a period of two years.

All administrative ministries, organisations and entities of the government shall ensure that the advice of the board has been sought, received and made available, in respect of officials in the rank of GM and above in state-owned banks and equivalent thereof in public financial institutions in case of frauds amounting to more than Rs 50 crore to the investigating agencies who may take such advice into account while taking consequential action, the order said.

Number of public sector bank frauds involving Rs 1 lakh and above was 2,630 involving Rs 20,005 crore in 2014-15. In 2015-16 the number was 2,299 involving Rs 15,163 crore. While the number declined in following financial year to 1,745, the amount soared to Rs 24,291 crore. In 2017-18 number of cases were 1,545 amounting to RS 6,916 crore, which further reduced to 739 cases involving Rs 5,149 crore, minister of state for finance Anurag Thakur told Lok Sabha on July 8, 2019.

Recently, finance Minister Nirmala Sitharaman also assured bankers that they will not be victimised for their scrupulous commercial decisions as authorities would maintain a distinction between genuine commercial failures and culpability.

A finance ministry official said that in the interim, internal advisory committees of the banks were screening cases of frauds to prevent harassment of bankers who made genuine commercial decisions. The move was aimed at instilling among bankers “ a sense of protection from prosecution for genuine decisions and promote lending,” added this person who asked not to be identified.

Last month, Sitharaman said that bankers need not fear the three Cs — the Comptroller and Auditor General (CAG), the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) and assured them that no case would go to CBI without banks signing off.

Rachit Sharma, DGM, Taxmann said, “The CVC’s order is a welcome move and in line with the finance minister’s assurance to bankers. Now bankers in state-owned banks can take commercial decisions in the interest of the bank without any fear of direct prosecution by authorities as the board will act as a protective layer for senior bankers.”