Govt Banks won’t allow Investigation Agencies to probe their Employees without Permission
MUMBAI: Government-owned banks are expected to inform the finance ministry that they will continue to withhold permission for investigative agencies to probe their employees unless substantial evidence of wrongdoing is presented.
The finance ministry is holding a meeting today (Wednesday) with the CEOs and Chief Vigilance Officers (CVOs) of public sector banks to address ongoing tensions between banks and investigative agencies probing officials for alleged fraud. Bankers argue that investigations are often initiated based on suspicion rather than evidence, leading to humiliating raids and inquiries that negatively impact employee morale. “These actions demoralize employees who are not even under suspicion,” said a senior banker.
Investigative agencies, on the other hand, claim that the lack of cooperation from banks has created a significant backlog of unresolved cases.
Legal Context
Under the amended Section 17A of the Prevention of Corruption Act (2018), investigative agencies require prior approval from the management of banks to initiate probes against their employees. While this law applies to both public and private sector banks, private banks fall outside the direct jurisdiction of these agencies but still require management approval for investigations.
Over the past year, agencies like the Central Bureau of Investigation (CBI) and the Vigilance Commission have raised concerns about delays in resolving hundreds of cases due to the banks’ refusal to grant permissions. Most of these cases involve frauds where banks have already filed First Information Reports (FIRs) to recover non-performing loans. However, the FIRs often target “unknown bank officials,” leading agencies to seek approval to investigate specific employees.
Banks’ Stance
At today’s meeting, bankers are expected to present the following points to the finance ministry:
- Requirement for Material Evidence: Investigative agencies must provide concrete evidence linking bank employees to fraudulent activities, such as collusion with borrowers or wrongful personal gains. Simply labeling a transaction as a loss for the bank is insufficient to justify approval for an investigation.
- Intent vs. Process Deviations: Banks will argue that deviations from established procedures should not automatically be equated with fraudulent intent. Decisions should not be judged retrospectively based on loan defaults.
- Interrogation Protocols: Bankers will recommend that employee interrogations should take place on bank premises rather than at agency offices such as those of the CBI or Enforcement Directorate (ED).
Proposed Resolution
To address these issues, the Indian Banks’ Association (IBA) has formed a committee led by former CBI director DC Jain. The committee has suggested that banks allow agencies to conduct preliminary inquiries, as most investigations begin based on suspicion.
The meeting is expected to focus on balancing the need for thorough investigations with protecting bank employees from undue harassment, ensuring that cases of genuine wrongdoing are addressed without undermining employee confidence or morale.
