HomeFinance NewsRBI governor Urjit Patel says preventive vigilance effective tool of governance in public institutions

RBI governor Urjit Patel says preventive vigilance effective tool of governance in public institutions

Reserve Bank of India (RBI) governor Urjit Patel said on Thursday that preventive vigilance can be used as an effective tool of governance in public sector institutions, arguing that punitive vigilance may not yield the desired result.

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By CNBC-TV18 September 21, 2018, 6:37:12 AM IST (Updated)

RBI governor Urjit Patel says preventive vigilance effective tool of governance in public institutions
Reserve Bank of India (RBI) governor Urjit Patel said on Thursday that preventive vigilance can be used as an effective tool of governance in public sector institutions, arguing that punitive vigilance may not yield the desired result.


Patel was speaking at a conference at the Central Vigilance Commission (CVC) on 'Preventive Vigilance The Key Tool of Good Governance at Public Sector Institutions'.


Preventive vigilance takes center stage and becomes a key effective tool of governance in a public sector institution.



The big takeaway: Reserve Bank of India considers preventive vigilance measures as the lynchpin of its efforts for good governance.

Definition of Vigilance: “Action or state of keeping careful watch for possible danger or difficulties"

Different classification of vigilance:

  • Preventive vigilance, which is aimed at reducing the occurrence of a lapse (violation of a law, a norm, or, broadly speaking, a governance requirement).

  • Detective vigilance, which is aimed at identifying and verifying the occurrence of a lapse.

  • Punitive vigilance, which is aimed at deterring the occurrence of a lapse.


Modern economic theory of corruption:

  • The theory emanates from Gary Becker’s insightful and seminal pieces on Crime and Punishment during 1968-1974.

  • The insight was criminals do the same calculation of the probability of getting caught times the potential punishment, while determining whether to choose a criminal lifestyle and what crimes to engage in.


What vigilance best in a public sector institution?

  • Punitive vigilance is difficult as rewards are low to start with, thereby limiting the possibility of downward revisions.

  • Detective vigilance too is ineffective as the detection does not lead to punitive outcomes. Even though it might help in some cases arrest the slide and contain with remedial measures.

  • Preventive vigilance is conceptually likely to be the most effective governance mechanism at public sector institutions.


Vigilance functions at the RBI:

  • Overall responsibility for vigilance work at the RBI vests with the Central Vigilance Cell.

  • Over the last four years, the percentage of vigilance cases against RBI employees’ stood on average at 0.004 percent.

  • In terms of complaint cases received against RBI or employees over this same period, stood on average at 0.081 percent.


Preventive vigilance measures at the RBI:

  • Whistle blower policy for employees.

  • Incidence of vigilance cases in RBI have been negligible.

  • Vigilance officers in RBI examine conflict of interest, nepotism, post-retirement benefits.

  • RBI inculcates sense of integrity in employees which is defence against malafide activities.

  • Disclosure on the bank’s website regarding functioning, decision-making, granting approvals and permissions.

  • Introduced the concept of “Integrity Pact” for large value procurement.

  • Separate site on our intranet site (called the “EKP”) where all vigilance related information is available in one place.

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