State-run banks voice concern over new guidelines on frauds

Public sector banks have petitioned the government on the latest revised guidelines on bank frauds, expressing concern over delay in disposal of cases that they fear could disrupt commercial banking decisions.

“It is leading to a situation where every complaint, till it’s resolved, is under scrutiny and those implicated cannot take any other decision. By lowering the threshold and including all officials, there is already an uptick in cases, which won’t get resolved quickly,” said a senior bank executive, who did not wish to be identified.

The issue had figured at a recent meeting of Indian Banks’ Association, he added.

In August 2019, the Central Vigilance Commission (CVC) in consultation with Reserve Bank had constituted a 4-member Advisory Board for Banking and Financial Frauds (ABBFF) headed by former banker and ex-vigilance commissioner TM Bhasin. ABBFF’s mandate was to investigate banking and financial frauds of ₹50 crore and above. The CVC, earlier this year in January, expanded the scope of ABBFF to examine bank frauds of Rs 3 crore and above and recommend action.

The ABBFF was set up to function as a ‘Safety Valve’ for bankers and critically and comprehensively examine the gravity of lapses, accountability, if any, on the part of officials, whole time directors of state-run banks and financial institutions.

As per the latest CVC guidelines, the cases classified as fraud (between ₹3 crore and ₹50 crore) and reported to Reserve Bank of India by banks and financial institutions on or after January 6, 2022 would also fall under the purview of the panel.

The Central Bureau of Investigation (CBI) can also refer any case or matter to the board where it has any issue or difficulty, or in technical matters with the concerned public sector banks and public financial institutions.

“While the spirit to expand the scope is commendable, the ABBFF doesn’t have the requisite infrastructure and human resources to settle the cases expeditiously,” said another bank executive, aware of the developments. He said this had led to disruption in day-to-day operations.

Due to ongoing investigations, bank employees facing allegations are either suspended, or divested of their charge. In some cases, promotions or even retirement benefits are on hold pending charges, the above quoted executive said.

A government official said the decision to expand the scope of ABBFF was taken after consultations with the RBI and the finance ministry. “We will discuss the matter with all stakeholders and see if this mechanism can be further streamlined,” he said.

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