Government take steps to protect commercial decisions made by banks

To protect banking officials including the managing directors and the chief executives of public sector banks from the procedural harassment on the name of enquiry the finance ministry has modified its 2015 framework on large-value frauds. It has done away with the personal responsibility of Managing Directors and Chief Executive Officers of public sector banks for 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 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.

For the purpose, the government has asked every bank to take steps to dispose of internal disciplinary and vigilance cases in a time-bound manner to that the cases do not linger on the name of procedural delay, which hurt the morale of the staff and reduces the scope of harassment. As part of its endeavour, the government has incorporated Section 17A in Prevention of Corruption (PC) Act requiring prior permission before initiating investigation against a public servant.

Government has now modified its 2015 framework on large value frauds doing away with the personal responsibility of the MD & 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 RBI and CVC circular(s).

Steps that were taken by the Government this regard:

** Section 17A has been inserted in PC Act that requires prior permission before initiating investigation against a public servant.

** Advisory Board for Banking and Financial Frauds (ABBFF) has been constituted for the first level of examination of suspected frauds above Rs50 crore.

** Personal responsibilities of MD &CEOs of PSBs for compliance with prescribed times lines has been done away with.

** Compulsory examination of fraud for all NPA accounts exceeding Rs50 crore has been aligned with CVC circular of January 15, 2020, whereby all such cases of suspected fraud are to be initially referred to the ABBFF.

** Committee of Senior Officers will be set up to monitor the progress of pending disciplinary and internal vigilance cases and to frame timelines to reduce delays in deciding such cases.