Staff Accountability In Public Sector Bank

The Dy Governor of RBI, Mr Chakrabarthy on the issue of Staff Accountability

Another area demanding urgent attention of banks is fixing of staff accountability. Our analysis has revealed that this is a neglected area so far as public sector banks are concerned. The general trend in such cases is to include a large number of officials in the probe so that the investigation is both delayed and diluted. Even in instances where investigations are concluded, there is a tendency to hold only the junior level officials involved in post disbursement supervision accoun and ignore the lapses on the part of higher officials who were involved in sanctioning of the advances, unless of course, the case becomes a high profile one or if some personal vengeance is involved. Our experience is that the accountability examinations do not comment on lapses of sanctioning officials even while the fraudulent intentions of the borrower might have been overlooked by the sanctioning officials ab initio. I have heard arguments such as how can the Board or the Top Management be expected to conduct post disbursal supervision? It can, at best, create a structure that ensures that the post disbursal supervision is properly conducted. I can accept the argument to a certain extent but if the structure created by the Board/Top Management fails to do its job properly, who should be held accountable? The limited point that I want to make is, if the Board/Senior Management does not have the time to conduct post disbursal supervision, why not delegate the sanction authority also to a lower level.

I have another issue regarding fixing of staff accountability in advance related fraud cases. We have observed that in the same case of consortium/ multiple financing, while staff accountability is established in a few banks, in several others, the banks do not find any staff involvement. To me, this defies logic. How can the banks shift the onus of conducting due diligence on the consortium leader and blindly follow whatever the latter does?

I believe there is a pressing need to probe staff accountability in a fair and objective manner and take it to its logical conclusion. This is necessary to instill a sense of responsibility amongst the officials for complying with the laid down procedures. Many a times, the internal investigation is put on hold when the probe is handed over to external investigation agencies. The completion of internal probe would also assist in prompt investigation by the law enforcement agencies and the perpetrators of fraud can be brought to book. Our analysis also shows that the law enforcement agencies are, at times, reluctant to accept the cases for probe, either on technical grounds or other constraints, due to which precious time is lost in initiating the probe leading to consequential dilution in quality of evidence, increased complexity in tracking money trails and deterioration in enforceable collateral.

While it is important that the probing and fixing of staff accountability be done in all seriousness, I also wish to add a note of caution here. We all know that the banks are in the business of taking risk and consequently, there may be occasions when the risk crystallizes and bank suffers losses on some of their credit decisions. Herein lies a need to differentiate between the losses which the bank suffers in its normal course of business and those which might have resulted from fraudulent actions. While fixing accountability, there would be a need to categorically establish mala fide intention/ malfeasance on the part of the erring employee involved in fraud cases so that the other officials do not become wary of sanctioning even good credit proposals.