Economy

Govt takes measures to protect commercial decision-making by banks

Updated : January 28, 2020 02:52 PM IST

The managing directors and chief executives of public sector banks will no longer bear personal responsibility apropos compliance with various prescribed timelines.

The government on Monday separately directed banks to set up a committee of senior officers to monitor progress of pending disciplinary and internal vigilance cases.

The managing directors and chief executives of public sector banks will no longer bear personal responsibility apropos compliance with various prescribed timelines. It is one of a slew of decisions that the Union government has taken to protect commercial decisions taken by banks.

Finance minister Nirmala Sitharaman has repeatedly assured bankers that adequate measures would be taken to protect honest commercial decisions taken by them and distinction would be made between genuine commercial failures and culpability.

Every bank was also required to take steps to dispose of internal disciplinary and vigilance cases in a time bound manner so that such cases do not linger on account of procedural delay so as to avoid adverse impact on staff morale and reduce scope for harassment. As part of this endeavor of the government, Section 17A was incorporated in Prevention of Corruption Act requiring prior permission before initiating investigation against a public servant.

Further, considering the complexities involved in the commercial decisions of managers in public sector, the Central Vigilance Commission has 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.

The government has also modified its 2015 framework on large value frauds doing away with the personal responsibility of the MD and CEOs of PSBs for compliance with various prescribed timelines. Powers have been delegated by Department of Financial Services (DFS) to the boards of public sector lenders to put in place a suitable mechanism for ensuring compliance of the various timelines laid down in the Reserve Bank of India (RBI) and CVC circulars.

Similarly, the instructions of DFS of 2015 regarding compulsory examination of fraud for all non-performing asset (NPA) accounts exceeding Rs 50 crore have been aligned with the CVC circular of January 15, 2020 whereby all such cases of suspicious fraud are to be initially referred to the ABBFF.

The government on Monday separately directed banks to set up a committee of senior officers to monitor progress of pending disciplinary and internal vigilance cases as procedural delay, on the one hand, adversely affects morale of the employees and on the other, breeds inefficiencies in the system.

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.

Govt takes measures to protect commercial decision-making by banks

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