Banks Look For A Bulletproof Defence Against Inquiries

According to official and banking sources, banks have asked the government to take into account amending the Lokpal Act to include a requirement that the anti-corruption authority obtain the bank's consent before referring a complaint involving its employees to the Central Bureau of Investigation (CBI). Following receipt of a complaint, the Lokpal may, in accordance with the current regulations, direct its investigation arm to conduct an initial investigation or, in the event that a prima facie case is established, transfer the matter to another agency, such as the CBI.

Already, a four-member Advisory Board for Banking and Financial Frauds (ABBFF), headed by former banker and ex-vigilance commissioner TM Bhasin, scrutinises bank frauds of Rs 3 crore and more and suggests suitable course of action, based on its examination of the gravity of lapses and wrongdoing. Any investigation at the behest of the Lokpal, on top of the ABBFF scrutiny, will only complicate the matter and add to bankers’ anxiety, potentially slowing down their decision-making, said a senior banker. As such, the ABBFF was set up in 2019 after wide-scale consultations between the Central Vigilance Commission and the Reserve Bank of India (RBI), to examine the lapses by officials and directors of state-run banks and other financial institutions in corruption cases, he added.

The demand for greater protection to bankers comes at a time when the government is nudging state-run lenders to satiate the growing credit appetite of a fast-recuperating economy and help spur growth. Following a spate of high-profile arrests in recent years, public-sector bankers feel the current mechanism needs to be bolstered to shield bankers for genuine business mistakes. Any further investigation ordered by the Lokpal will make lives difficult for senior bankers, some of whom have been targeted even after retirement, banking sources said.

According to the sources, lenders are attempting to get measures similar to Sections 17 A and 19 of the Prevention of Corruption Act (PCA) included in the Lokpal Act under the auspices of the Indian Banks' Association (IBA). The goal is to obtain more protection from arbitrary police or other official actions in response to legitimate company mistakes.

According to Section 17A of the PCA, the competent authority must first approve any police investigation into decisions made by public employees while performing their duties. In a similar vein, Section 19 of the PCA requires prior approval from the appropriate authority before filing charges for offences committed by them. One of the individuals stated, "The IBA is in discussions with the department of financial services for modifications to the Lokpal Act."

The government has often promised to stand up for lenders who might make legitimate business mistakes. Nevertheless, a number of prominent public-sector bankers have been detained recently, primarily by local police, which has led the personnel of state-run banks to want more protection from arbitrary action by either local police or investigating agencies.

A four-member Advisory Board for Banking and Financial Frauds (ABBFF), led by former vigilance commissioner and banker TM Bhasin, already investigates bank frauds of Rs 3 crore and above and recommends appropriate action based on its assessment of the seriousness of errors and misconduct. According to a senior banker, any inquiry ordered by the Lokpal, on top of the ABBFF examination, will simply exacerbate the situation and increase bankers' uneasiness, potentially delaying their decision-making. In order to look into the mistakes made by employees and directors of state-run banks and other financial institutions in cases of corruption, the ABBFF was established in 2019 following extensive deliberations between the Central Vigilance Commission and the Reserve Bank of India (RBI).

At a time when the government is pressuring state-run institutions to feed the expanding credit appetite of a rapidly recovering economy and support growth, there is a call for additional security for bankers. Public-sector bankers believe the current procedure has to be strengthened to protect bankers for true business failures in light of a recent wave of high-profile arrests. Senior bankers, some of whom have been targeted even after retirement, may have a terrible time if the Lokpal orders any additional investigations, according to banking sources.