New vigilance norms for banks take effect

CBI’s Banking Securities and Fraud Cell (BS & FC) at Delhi, Bombay, and Bangalore would handle cases if the amount of the alleged bank fraud exceeds Rs five crore, though the agency has the powers to take up any fraud case.

Regardless of the quantum involved in the fraud, CBI may register any case suo motu, if it has reason to believe that it has inter-state or international ramifications, according to the guidelines framed after a series of meetings the Central Vigilance Commissioner N Vittal had with chief executives and senior officials of CBI and RBI.

The CVC hasalso asked banks to extend full cooperation to CBI, including providing of certified photocopies of all relevant documents along with the complaints to prevent delays in investigation.

Redesignating the existing Advisory Board on Bank Fraud as Central Advisory Board on Bank Frauds (CABBF), CVC proposed to constitute regional advisory boards saying these would form part of the organisational infrastructure of the CBI.

Appointments on the boards would be made from a panel of names approved by CVC. The cases involving officers of the rank of general manager or equivalent or higher would continue to be referred to the CABBF. The cases of other officials of lower rank would be required to be referred to regional boards. The board concerned would give its considered opinion within one month from the date of reference, failing which CBI would be competent to decide the matter without advice.

The advice of any of the boards would not be binding on the boards, it said adding that the investigational andsecretarial services required by the boards would be provided by the RBI. Elaborating on the vigilance cases in banks, the guidelines said that in banking institutions risk-taking forms an integral part of business and therefore every loss caused to the organisation either in pecuniary or non-pecuniary terms need not necessarily become the subject matter of a vigilance inquiry.

While it would be quite unfair to use the benefit of hindsight to question the technical merits of managerial decisions from the vigilance point of view and to ignore motivated or reckless decisions, which have caused damage to the interests of the organisations, it said.

A distinction had to be drawn between a business loss which had arisen as a consequence of a bona fide commercial decision and an extraordinary loss which had occurred due to recklessness.