‘Perform or Perish’ used to be the mantra for businessmen, especially exporters. But for the officers in public sector banks (PSBs), it appears to be ‘perform and perish’.
PSBs often face allegations of insensitivity to clients’ credit needs from government agencies, entrepreneurs and borrowers.
Unlike other categories of banks, PSBs come under the purview of the Central Vigilance Commission (CVC). Each PSB has a vigilance department headed by a Chief Vigilance Officer (CVO). The CVO is appointed after an interview conducted by the Banking Department, with officers drawn from PSBs and the RBI.
The panel for each bank is sent to the CVC who gives the final clearance. The CVO for each PSB is from other banks. He reports directly to the chief executive of the bank. His performance is assessed by the chief executive and reviewed by the CVC. If the CVO has any doubts about the Chief Executive’s actions, he can directly communicate with the CVC.
Every bank has formulated a policy for examining staff accountability whenever an account turns bad. After the scrutiny by senior officers, the case is classified as ‘vigilance’ or ‘non-vigilance’ by a committee of senior executives (as per CVC guidelines). If it is classified as a ‘vigilance’ case (where mala fide or gross negligence is suspected), the case is dealt with by the CVO who decides whether the offence attracts a ‘major’ or a ‘minor’ penalty. The final penalty must have his concurrence.
Cases in which senior officials above a certain grade are involved are sent to the CVC by the CVO for such a classification and concurrence with the penalty proposed. In addition to the CVC, the Central Bureau of Investigation (CBI) also has jurisdiction over PSB officers. The case is examined by the CBI on a reference by the CVC or the bank or suo motu.
The value of security available is examined and wherever there is insufficient security, it is concluded that the bank officials have entered into a criminal conspiracy with the borrower.
The value of security depends on the perception of the bank about the credibility, integrity and the value of the borrower’s connections at the time of appraisal. When the case is examined by an outside agency, the account would have already turned into a non-performing asset and the perception is totally different. No large exposure will have 100 per cent security coverage.
Field experience vital
The final fate of the official depends entirely on the mindset of the CVO. A person with operational experience understands the nuances of decision-making and takes an objective view of the issue. If, unfortunately, the CVO is a person with little operational exposure the official’s life becomes miserable.
It is undeniable that accountability has to be examined and those found delinquent punished. But a distinction has to be made between genuine error of judgment and acts of malfeasance.
Staff accountability is studied seven or eight years after the sanction of the loan. Credit decisions are taken based on the circumstances prevailing and the information available at that point of time. No commercial organisation including PSBs can claim that 100 per cent of their decisions have been correct and resulted in profit.
Once a case is classified as ‘vigilance’ it takes years for the whole process, including the appeal, to be completed. During this time, the official undergoes trauma and loses his promotions, resulting in stagnation and frustration. The position is worse when fraud is involved. Take, for example, the case of borrowers obtaining housing loans through doctored documents.
More often than not, the officer is an innocent victim of a clever fraudster. But it is presumed that the official has a role in the fraud and he is subjected to untold misery.
When hard-working and enthusiastic officers get demoralised, fear psychosis sets in and decision-making is the casualty. Credit proposals are examined with a fine-tooth comb and ways and means are found to reject the application and avoid the trauma later.
While the CVC itself has given PSBs clear directives to distinguish between commercial decision and mala fide action, the implementation is subjective, depending on the CVO’s mindset.
It is high time PSB officials are taken out of the CVC’s purview. Instead, a robust internal mechanism with sufficient checks and balances needs to be built up to ensure that the guilty are not spared, innocent are not punished and accountability is fixed for non-performance.
(The author is a former Deputy General Manager of State Bank of Mysore and State Bank of Travancore.)