‘RBI reviewing working, performance during onsite inspections’

Top public sector bank officials have told the Finance Ministry and the Reserve Bank of India that the Central Bureau of Investigation should not call into question the commercial decisions taken by them in good faith.

They warned that if the investigating agency starts questioning the commercial decisions taken for growing the loan book, then the decision-making process as well as the officers’ morale will be affected.

CBI probe

This feedback was given to the Ministry and the RBI following an enquiry conducted by the CBI into certain alleged irregularities committed by the former chief of a Karnataka-based public sector bank in waiving the processing fees in the case of some of the borrowing companies.

“The CBI conducted an investigation into the waiver/reduction of processing fees granted by the former chief of the public sector bank as it suspected his bona fides in exercising such discretionary powers,” said a banker well-versed with the development.

For achieving loan growth in a competitive market, banks are required to waive or reduce processing fees and other charges and also reduce the rates of interest.

“It is not proper to judge the conduct of bank officials by isolating and adding up the total amount of waiver of fees or reduction in interest rate,” said the banker.

Bankers emphasised that review of decisions taken by them has to be done by taking into consideration the overall growth of advances and aggregate income generated by such growth.

In their feedback, the banks, under the aegis of the Indian Banks’ Association, underscored the fact that their working and performance is reviewed by the regulator through annual onsite inspections.

“Sound health of the banking industry in India is indicative of the capabilities of the RBI to supervise the banks and there is no need for an agency established for investigation of crime to assume a regulatory role,” said a public sector bank official.

Freedom needed

Bank officers, according to the official, need to be provided freedom to use tools of waiver/reduction of processing fees and other charges, subject to delegated powers, policy norms and guidelines issued by their board of directors to facilitate achievement of business growth in the competitive market.


(This article was published on November 13, 2012)
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