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CVC releases framework for advisory board for banking and financial frauds

Updated : January 17, 2020 09:23 AM IST

The Central Vigilance Commission (CVC) has released a framework for the Advisory Board for Banking and Financial Frauds.

Ever since the Prevention of Corruption Act was passed there have been people saying that there is a need to ring-fence honest commercial decisions. Of the 100 commercial decisions that a CEO of BHEL or a CEO of SBI takes, it is possible that one or two of the decisions do not take into account all possibilities and a wrong decision is taken. However, that may not necessarily mean that the man is corrupt.

So, there has been a demand that commercial organizations within the government should be ring-fenced and that’s exactly what the CVC has done. It has setup a board for banking and financial frauds. With this, not only the public sector undertaking (PSU) bankers come in, but so do all government officials; secretaries of the ministries, a PSU like BHEL or BPCL all of them come under this.

According to this framework, the concerned department should go to a board, which will be called he Advisory Board for Banking and Financial Frauds. There is already a board under the CVC but it has been getting larger and is been given a statutory status. The first set of members of this board are a former CVC member TM Bhasin who is also former chairman of Indian Bank, then there is Madhusudan Prasad, DK Pathak – all of them former IAS officers and some experts from the financial field.

The framework suggests that all ministries, all companies, if they smell a fraud should first tell this board. This board will then investigate whether the decision was taken in good faith or whether there is a prima facie evidence of a fraud, and only if there is prima facie evidence of a fraud, will they pass it on for police investigation. Likewise, if the police get an FIR, they should also go to this board, ask them to examine it and see whether there is mala fide involved. If it’s a normal commercial decision, which went bad then the board will advise that there is no police investigation required.

There is already such a committee within the CVC but now that will get a legal status. This decision has come at the right time, when everyone is distrusting everyone and banks are refusing to take decisions of lending. This will hopefully  help to smoothen the wheels of commercial decision-making.

Overall, it is a very good step from the CVC but further clarity is needed on whether ED, CBI investigations come under this framework or not, because police investigation definitely come under this.
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