Separately, bankers have approached the finance ministry seeking a “sunset period” for investigations so that they are not hounded by probe agencies for genuine business decisions. They have suggested that agencies, such as CBI and CVC, should be barred from looking into cases if a loan account remains standard for seven or 10 years.
“There can be issues due to the prevailing situation in the economy or a particular industry, or a company’s product may become obsolete over a period (of time). But if there are no problems for a certain number of specified number of years, then there is no need to go on a witch hunt, some of which happens post-retirement,” said a banker.
While the department of financial services (DFS) is yet to act on this, it, along with RBI and CVC, has agreed to tweak the rules in fraud cases. The move comes at a time when bankers have raised fresh concerns over what they believe is overreach by the three Cs — CVC, CBI and the Comptroller and Auditor General of India — on several occasions. In the past, they have cited these concerns for going slow in sanctioning loans, although Prime Minister Narendra Modi and finance minister Nirmala Sitharaman have repeatedly offered full support on genuine business decisions.
In a circular issued last week, CVC said that based on discussions with RBI and the finance ministry, the Advisory Board for Banking and Financial Frauds (ABBFF) will examine the role of all executives and whole-time directors (serving and retired) in cases of Rs 3-50 crore classified as fraud by state-run public sector banks and financial institutions on or after January 6. Cases reported before the January 6 deadline will be referred to the panel if they have reached the disciplinary authority or where criminal cases are yet to be filed.
While CVC has said that a separate board for cases between Rs 3 crore and Rs 50 crore will be set up, bankers said that there was a need to have quick decisions as the number of cases being referred to ABBFF will now rise multiple times.
In the past, banks have responded by classifying a large number of cases as fraud to ensure that the management does not face action later on.