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Sarbajeet K. Sen

NEW DELHI, Feb. 6

THE public sector banking industry may have been in the grip of an extended bout of hallucination over lurking shadows of investigative authorities. At least the Central Vigilance Commission thinks so.

Finding no basis for allegations by banks of undue harassment by sleuths, the Central Vigilance Commissioner, Mr P Shankar, has recently written to the Finance Minister, Mr Jaswant Singh, pointing out that the investigative agencies have virtually no hand in the process of slowdown of credit disbursal whenever that happens.

"I have written to the Finance Minister pointing out to him that slowdown in credit disbursal is not because of fear of investigative bodies such as the CBI or the CVC, but the result of many other external factors such as the overall business environment," Mr Shankar, said.

He said that the letter was shot off to the Finance Minister after the banks raised the issue once again. The PSU banks have been saying that one of the primary reasons for the slowdown in credit disbursal is the fear of being subjected to investigations into decisions on loans were they to become non-performing assets (NPAs). In fact, Mr Singh himself had stated at certain public fora that he would have the issue looked into by appropriate authorities.

Following this, Mr Shankar recently convened a high-level meeting with chiefs of all public sector banks to understand their views and fears. Others who attended the meeting were officials of the Reserve Bank of India (RBI) and the Ministry of Finance.

Mr Shankar said that consequent to the meeting, the office of the CVC would soon be clarifying its position to various banks. The commission has decided to reiterate that referrals to the CVC should be only as per the RBI guidelines on the matter and should be limited to instances where the management feels that some bank official has been directly involved in the act of defrauding the bank. "If there has been a loss to the bank on account of the involvement of outsiders, the matter has to be referred to the local police for investigation," Mr Shankar said. Moreover, larger and more intricate cases would be referred to the advisory body on bank frauds, he said.

However, the banking industry is unlike to be completely convinced by the stand taken by the CVC on the role of investigating bodies. In what is likely to reflect the views of all PSU banks, Mr V.K. Chopra, Executive Director, Oriental Bank of Commerce (OBC), says that fears of harassment do exist, though at times such anxiety might be exaggerated. Mr Chopra had headed a high-level sub-group constituted earlier by the CVC to study bank frauds and to suggest ways to minimise their incidence.

"It is true that credit disbursal may not be hampered entirely by such fears (of future investigations). But in a large system, there is perhaps a tendency of people to be overcautious so that they do not come under the CVC, CBI scanner," Mr Chopra says.

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