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FOLLOWING several representations made
by the Indian Banks' Association (IBA), and the Banking Division of the Finance
Ministry, the Central Vigilance Commission (CVC) has decided to limit its
jurisdiction to officers of Scale V and above in public sector banks, i.e., to
personnel above the category of Assistant General Manager. While the move has been welcomed by the
banking sector at large and has given new impetus to officials to take
commercial decisions freely without fearing that CVC investigation for
decisions have gone bad, it also raises questions about the level of
preparedness among banks to deal with internal fraud. In an interview with Business Line, Mr
V. Leeladhar, Chairman, IBA, discusses the procedure and processes that will
help banks be more `vigilant' in the future. The following are the excerpts: What was the need that prompted CVC to
limit its jurisdiction to officers of Scale V and above in public sector banks?
The coverage of CVC used to be up to the
Scale III officers, who would generally be in charge of medium size branches.
Most of them were responsible for sanctioning all advances, be it priority
sector, housing or other lending's at that level. Although the number of cases handled by
CVC was small compared to the number of banking employees in the system, even
the punishments doled out to this microscopic segment send signals to the
entire sector. Therefore a kind of fear psychosis crept into the minds of the
officers who were responsible for sanctioning advances resulting in
non-performance, as non-performance may not attract a penalty but an account
turned NPA just might. Therefore, there was a lot of indecision, which was
responsible for the slow growth of credit, or even the lack of credit offtake
in the banking sector. Therefore, the CVC's coverage has been
restricted to scale V and above, i.e., officers holding the designation of
Assistant General Manager and above. Will the CVC decision lead to dilution of
vigilance in banks? Just because CVC has restricted its
jurisdiction, it does not mean that vigilance will become lax. Every bank has a
Chief Vigilance Officer who is an outside officer on deputation from another
bank. No doubt, the vigilance system in banks has to be stabilised and has to
be focused on `preventive vigilance'. These days preventive vigilance is the
focus for banks, and a lot of material on the types of frauds, various methods
in which the system may be abused etc., is being circulated among bank
employees to create awareness. The other function of vigilance has to be the
`post-mortem' of cases, which have been brought to light. How does a bank identify vigilance
cases and how does the machinery work to pin accountability and impose
penalties? Cases usually come to bank through two
or three avenues such as customer complaints, inspection of branches, or when
accounts become NPA and there is an investigation to fix up staff
accountability. While the CVO decides staff accountability, it has been
suggested that each bank must have a committee of three General Managers, who
will examine every complaint, staff audit etc. The recommendation made by the
committee will go to the CVO who will decide whether the case is a vigilance
case. The CVO will forward his decision to the
Disciplinary Authority within the bank, who in turn will decide whether the
offence deserves a major or a minor penalty. Based on that, the first stage
advice will be sought from the CVC, once that comes the enquiry starts. The
Authority pronounces the penalty and refers it back to the CVC for approval. How has vigilance changed today? In the past vigilance cases were often
opaque. For example, if a transaction causes heavy losses to a bank, it would
be treated as a vigilance case, even if it was only a bad commercial decision
and not really fraud. Many things would come into the net of vigilance even
though they were not `Malafides'. Therefore in response to the Indian
Banks Association's requests, the CVC has now made it clear that `vigilance
angle is obvious' only in malafide cases, like in cases where the official has
demanded or accepted gratification other than legal remuneration for an
official act etc., or acceptance of bribes, possession of assets
disproportionate to known sources of income etc. Henceforth, officials can feel free to
take commercial decisions. If they are not indulging in malafide activities,
they need not fear vigilance. Nobody has to avoid performance-citing fear of
CVC anymore. |