CBI, CVC and CAG won’t harass bank officials: Nirmala Sitharaman

In a bid to allay their fear of the three Cs, namely the Central Bureau of Investigation (CBI), Central Vigilance Commission (CVC) and Comptroller and Auditor General (CAG), finance minister Nirmala Sitharaman on Saturday assured bankers that prudent commercial decision-making would be protected and there will not be any harassment by investigating agencies.

“There was a concern that genuine bona fide decisions are not being made because of the worry of undue harassment. In the presence of CBI director today (we) had a meaningful conversation with banks. The misgivings have been explained to banks,” Sitharaman said, adding that this will eventually accelerate the decision-making process in banks towards lending.

“No case whatsoever goes to CBI without banks themselves deciding to do so. There is no suo motu case that the CBI takes against the banks,” the minister told reporters.

Any suspected case of fraud involving more than Rs 3 crore will be first looked at by an internal committee of the banks, and will then be sent to the banking regulator and to the investigating agency.

At a meeting with heads of state-run banks, Sitharaman was reviewing the effectiveness of the steps taken in recent months to make capital available to businesses and non-bank lenders, besides seeking their views ahead of her second Union budget, to be presented on February 1, 2020.

Sitharaman’s remarks come after Prime Minister Narendra Modi, while speaking at the Hindustan Times Leadership Summit earlier this month, sent out a message to all banking employees to take “genuine business decisions” without fear.

He announced the imminent creation of a new framework which would bring banks under a protective umbrella to enable effective decision-making. The PM added that if a banker is afraid of taking decisions, he will be reluctant to take them. “The government cannot leave him helpless. It will take responsibility. I will take responsibility,” he said at the event.

Sitharaman said that CBI will develop a mechanism whereby notices sent by an investigating agency will bear a registration number to avoid any scope for unauthorised communication and consequent harassment.

“While pursuing criminal action against those responsible, the agency shall be sensitive to the distinction between genuine commercial failures and culpability. It was also noted that there is need for preserving the value of the business enterprise by treating it on a separate footing from culpability of individuals, if any,” the ministry of finance said.

To enable transparency, state-owned banks will be able to report instances of fraud through e-filing of first information reports (FIRs) on a designated email address of the CBI, in order to avoid scope for any arbitrage due to information asymmetry. The agency will also create a
dedicated phone number on which any person can give information regarding any undue harassment by the investigative machinery. Sitharaman also gave instructions to banks to form committees, with general manager level officers, to look at the vigilance-related cases that have been accumulated over several years and that are yet to be closed. Such cases will have to be pursued, she said. “Banks were also advised to ensure rigor and adherence to objective standards in selection of forensic auditors and devising objective SOPs {standard operating procedures} for carrying out of forensic audit,” the statement said. To strengthen the forensic auditor empanelment process, the ministry urged the Indian Banks’ Association to put in place robust arrangements for assessing adherence to standards by forensic auditors and tie up with the CBI for their training.