Bankers upset over police action after BoM arrests

Decisions taken by bankers are commercial in nature and they are not strictly rule based because they judgmental in nature.

DSK group fraud case: Bank of Maharashtra's top officials held

The police were probing the role of these bank officials for allegedly sanctioning loans to the builder without following due diligence.

The spate of arrests of public sector bankers, especially the top officials of Bank of Maharashtra, have led to considerable anger among bankers, especially top officials of public sector banks. When contacted, top bank officials expressed their anguish over the arrests and said such police actions without going into the merit of the cases will hit the banking sector, one of the main growth engines of the economy.

“Bank chairmen should protest. Actions like arresting BoM CEO will destroy the banking sector. What are they trying to show? Government nominees are silent when corporate governance norms were violated in ICICI bank. Why they are not taking action in the case of ICICI Bank? PSU bank chiefs are easy targets. They should come out and protest?” said the former Chairman of a leading PSU bank.

“Bank of Maharashtra episode has devastated many of us bankers. Those who know him (BoM MD & CEO Ravindra Marathe) in person will also vouch for his impeccable character. The issue is whether public sector banker is a public servant and whether permission from the government is required and obtained? If the issues involved are policy violations or regulatory violations who will go into these issues — the regulators or the investigative agencies without government permission?” said a top bank official.

Decisions taken by bankers are commercial in nature and they are not strictly rule based because they judgmental in nature. “When such decisions taken on *trust* are investigated by agencies whose premise is *doubt*, how can you reconcile this anomaly without a third party — i.e. the government — to balance?” he said. In the DSK case, BoM was not the sole bank or the lead bank. It was one of several banks which gave loans to the company.

“If BoM is not the sole lender, why single out BoM. It appears that there was collateral security, covering loan amount fully. If an account is under SMA 2 category, can’t a bank take a commercial decision to hand hold a stressed account? Who will bear the cost of reputational loss?” said an official who preferred anonymity.