Relief to bankers: CVC expands scope of Advisory Panel on bank frauds to cases above ₹3 crore

In a move that could help remove the “fear psychosis” among public sector bankers, the Central Vigilance Commission (CVC) has expanded the scope of an advisory board thatconducts first level examination of bank frauds before recommendations or references are made to investigative agencies such as Central Bureau Investigation (CBI) by the respective public sector banks.As against a current threshold of bank frauds above ₹50 crore, this advisory group —Advisory Board for Banking and Financial Frauds (ABBFF)—will now cover all fraud cases involving amounts of ₹3 crore and above, the Central Vigilance Commission ( CVC) said in an order on Thursday. Hitherto, the ABBFF was only examining large bank fraud cases above ₹50 crore.Moreover, the scope of ABBFF has also now been expanded to examine the role of all levels of officials/wholetime directors including ex-officials /ex-wholetime directors.The CVC has made these changes to the scope of the Advisory Group after consultations with the Reserve Bank of India.This lowering of threshold should give assurance to bankers that somebody else is also looking into it before it goes into fraud investigation by the government investigative agencies, said a former chief executive of a public sector bank.“Now there is some cushion available. But people have to get convinced”, he noted.

Effort to push credit growth

Many bankers also see the latest move as an effort to push credit growth in the banking system, which has been quite tepid at about 6 per cent. Bankers have, in the recent years, been cautious in their credit sanction decisions especially in the wake of the fear of the 3 Cs—CBI, CVC and CAG. This along with rising NPAs in the banking system had made them wary of being aggressive on the corporate lending front, banking industry observers said. The current norms require every public sector bank and financial institution to file complaints with CBI for all bank frauds above ₹3 crore. However, these complaints was hitherto filed in large bank fraud cases ( above ₹ 50 crore) only after due approval by ABBFF.Meanwhile, the CVC hasclarified that ABBFF will examine all cases of total amount involving ₹3 crore and upto ₹50 crore also, which are classified as fraud and reported to RBI, by PSBs and in case of public financial institutions, fraud declared, on or after January 6, 2022.

IBA suggestion

The Indian Banks Association (IBA) had made several suggestions to the Department of Financial Services (DFS) in the Finance Ministry to provide comfort for the bankers so that they can take lending decisions without fear of action of the 3Cs. One of the suggestion was introduction of sun-set clause — this would have meant that no action can be taken by any investigative agency against a banker for a credit decision after lapse of a specified period. However, IBA’s suggestion did not find acceptance with DFS and, therefore, did not form part of the latest CVC announced norm changes, sources in IBA said.

In effect, this would mean that the government-controlled investigative authorities still enjoy the right to open a matter against bank officials even if they had retired or if the bank they had worked for had later been amalgamated with another PSB, they added.

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