Mechanism Set Up to Protect Honest Commercial Decisions by PSBs
The top management of public sector banks (PSBs) will now not bear any personal responsibility in cases where genuine banking decisions end up as commercial failures, as part of the government's latest move to protect commercial decisions taken by bank heads, an official said on Tuesday.
"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," a Finance Ministry statement said.
The government has also separately directed banks to set up a committee of senior officers to monitor the progress of pending disciplinary and internal vigilance cases.
"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", it said.
This Committee of Senior Officers will monitor the progress of pending disciplinary and internal vigilance cases and will frame timelines to expedite the concluding of such cases.
There will be compulsory examination of all non-performing asset (NPA or bad loan) accounts exceeding Rs 50 crore on whether fraud is involved, according to a Central Vigilance Commission (CVC) circular of January 15, 2020, whereby, all such cases of suspected fraud are to be initially referred to the Advisory Board for Banking and Financial Frauds (ABBFF).
Considering the complexities involved in the commercial decisions of managers in public sector, the CVC has set up the Advisory Board for Banking and Financial Frauds (ABBFF) for a mandatory first-level examination of suspected frauds in excess of Rs 50 crore involving public servants equivalent in rank to AGMs and above, before enquiry or investigations begin, the statement said.
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 complying with various prescribed timelines.
Powers have been delegated by the Department of Financial Services (DFS) to the board 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 NPA accounts exceeding Rs 50 crore have been aligned with the CVC circular of January 15, whereby all such cases of suspected fraud are to be initially referred to the ABBFF.