Companies & Sectors
Tainted bank CMDs walk free through weak legislation

In the absence of strong legal provisions, top bank officials are allowed to go unchallenged even as murky dealings and irregularities surface. Is the present system really so hapless in nabbing the white-collar culprits, or is it a case of conveniently sweeping the dirt under the carpet?

Openly flouting established guidelines, indulging in favouritism in awarding promotions and contracts, even accepting bribes for sanctioning big-ticket loans... these are just some of the irregularities that have emerged of late, with top honchos of some banks involved in a big way. Although this murky picture has come to the fore only recently, these practices have been going on for some time. The shocking fact is that the government appears ill-equipped to deal with this menace, allowing top honchos of banks and other institutions to run free. The reason for this ineptitude, sources tell us, is the alarming absence of a robust legal framework to nab the wrongdoers.

In an environment where ethics appear to have taken a backseat, it is bewildering to know that very little can be done to arrest this problem. The shocking instance of the Centre's inability to initiate proceedings against former Central Bank of India chairman and managing director H D Daruwala, accused of violating several guidelines, is indicative of the rot in the system.

Although the charges levelled against Ms Daruwala by a whistle-blower have been proved, she is hardly breaking any sweat, having since retired from her post. Apparently, the case was beyond the ambit of the finance ministry, as current provisions do not provide for disciplinary proceedings against CMDs of nationalised banks. Ms Daruwala only earned a mere displeasure note from the ministry for all her shenanigans, according to a report in The Times of India.

A communication from the ministry of finance (vigilance division), which Moneylife has access to, clearly states, "These provisions do not have any provision for initiation of disciplinary proceedings against CMDs and EDs, who are Presidential appointees, except removal from the service of the bank after following due procedure. In case an officer is found guilty of any misconduct and in the meantime he retires from the Board, Department has no option but to issue a 'displeasure' which may not serve any purpose." This has clearly exposed a gaping hole in the legal system as it stands today.

The case with the Central Bank of India CMD is not a one-off; there have been several other instances where bank heads have committed white-collar crimes, only to be let off without as much as a rap on the knuckles. Another top official from Punjab National Bank was also served a displeasure note for certain misdeeds, sources have informed us. But the real question here is, whether this is actually an inability stemming from a lack of legal recourse or a deliberate attempt to hide deep-rooted corruption from the public?

The ministry is apparently in the process of framing new rules and regulations that would be applicable to full-time board level appointees in all public sector enterprises. It is only now that the Centre is waking up to the increasing instances of irregularities in the top institutions of the country and trying to come up with tougher laws against corrupt officers. Even then, it is alarming how the rot has been allowed to take root. How is it that no legal action can be initiated against such high-ranking officials, who are dealing with public money every day?

Commenting on the existing legal provisions, Subhash Sawant, general secretary, Indian National Bank Employees' Federation said, "The present system allows corrupt high-level bank officials to go scot-free. There is absolutely nothing that can bring them to book. Up to the level of general manager, the particular bank's service regulations come into force, where provisions for disciplinary action are available. However, positions of CMD and executive director do not fall under these rules, as they are appointed by the president of India. Even if investigations are carried out, these officials escape during court proceedings, due to lacunae in the regulations. It is my firm opinion that these people be brought under the purview of some law."

Dr Anil K Khandelwal, former chairman, Bank of Baroda, confirmed that current provisions do not permit any action against the CMD. However, if a Central Bureau of Investigation (CBI) inquiry leads to a prosecution, then the court can hand out a punishment at its discretion. It was under these circumstances that former chairmen of UCO Bank and Indian Bank were booked several years ago.
 
CH Venkatachalam, general secretary, All India Bank Employees' Association, believes that more transparency is needed. "The chairman and executive directors are equally employees and pubic servants. If any guilt has been proved against them, there must be tougher provisions to prosecute them. These people are dealing with huge sums of money and are drawing salaries, at the same time taking money through some underhanded means. It is important that such high positions of power be made more transparent," he said.

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COMMENTS

RNandakumar

6 years ago

India needs a true patriot like Morarji Desai. We need very strict monitoring of land purchases and gold purchases by the public whoever they are. The present IMPOTENT income tax department should be provided with required legislations to seize and sell any unaccounted purchases of land and gold and imprison offenders. Land and gold are two exit points of corruption money.

shamil

6 years ago

Why only talk about one CMD of Central Bank. There were many such instances in the past. A south based PSB was converted into a personal safe by another north based CMD during his tenure at the bank. No action was taken against him despite fool proof evidence against his misdeeds. During his tenure one senior bank functionary committed sucide unable to bear with the CMD. This is nothing new in the banking sector. Yatha "RAJA" thatha Praja. Scams have become normal thing in India, so much so nobody seems to pay attention to it. Well this is trend is not so much in the private sector because the salary structure of CMDs takes care of them to a great extent. Further the private sector CMDs do not feel protected as PSB CMDs are from Finance ministry mandarins. Therefore most of them stick to the rules of the game.

REPLY

BEIP FORUM

In Reply to shamil 6 years ago

Private Banks are much ahead in frauds, they buy the branch and atm premises in close relatives name and rent out to bank at three times the prevailing market rate.

Nagesh KiniFCA

6 years ago

it is in deed a sad state of affairs that big ticket loans granted for considerations turn bad and yet the Finance Ministry can do nothing and the tainted CMDs,EDs and others roam scot free. If it is Central Bank now earlier it was Indian Bank too.

SANarayan

6 years ago

In the PSUs there is the Conduct Discipline & Appeal Rules which apply to all Officers and as such should apply to CMDs of Banks where the appointing authority, which in their case would be President of India acting thru MOF can take action.. In addition the Prevention of Corruption Act can be applied provided MOF shows will and guts.

SUNIL HEMNANI

6 years ago

Well maybe should have as simple a walk away with a loan taken from the bank . Alternatively it wouldnt be fair to trouble them when our politicos get away with no hassle.Lets be fair about this

K Narayanan

6 years ago

What is the salary of CMD of SBI about which you have already written?
Hardly Rs 24 lakhs p.a.and the salary of ED is a little less.Compare this with the salary of MD of ICICI bank,HDFC bank,Axis bank-around Rs2.5 cr p.a.
Are they more efficient?Absolutely not.These banks are owned by foreigners to the extent of 74% with Indians as front end.Dr YVReddy categorically branded them as foreign banks.They are not accountable to anybody and can do whatever they want taking shelter under pvt sector and Govt shd not interfere.Don't say naively that they are regulated by the so called RBI.It is overall -not all operationl angles.Then what do you expect from these CMDs or EDs of PSBs -poor cousins of the pvt sector MDs.Don't expect them to be honest and be poor on retirement.I am not justifying their actions but our country is winning Gold medals in corruption in all activities other than sports.-very fast.Thanks to FII investment,fastest GDP growth on account of these FIIs-land prices zoomed 5 times in 5 years and corruption has grown much faster than that.From MC(municipal councilor) to CVC corruption has become unbearable.May God save our country from the vulgar politicians of all hues and their obedient civil service.

REPLY

BEIP FORUM

In Reply to K Narayanan 6 years ago

Sir, We should not forget our 8 CJI out of 16. We don’t know how they will carry so much of wealth along with their last rituals. Now no one can do anything, only the nature has to play its role thru cyclone.

K Narayanan

In Reply to BEIP FORUM 6 years ago

Well said.I agree.When our MMSinghji knows nothing about 2G but only SoniaG and shamelessly keeps silent on 2G,Kalmadi and strongly supports CVC at the apex court what you expect would happen to the country.Amen!

BEIP Forum

6 years ago

Madam, we will appreciate a similar article on private sector bankers accountability to public money and the legal provisions required to handle such issue.

Bajaj motorcycle sales jump 19% in November

The country's second largest two-wheeler maker Bajaj Auto Ltd (BAL) today reported 19% jump in motorcycle sales at 2,65,036 units in November.
The company had sold 2,42,390 units in November last year, BAL said in a statement.

In October this year, the company had reported its highest ever motorcycle sales in a month at 3,29,776 units.

BAL's exports dipped 8% during November at 90,869 units as compared to 98,521 units in the same month last year.

"Exports were affected due to logistics constraints," the company said in the statement.

In the three-wheeler category, BAL reported flat growth during November at 34,195 units as compared to 34,111 units.

On Thursday, BAL ended 0.23% down at Rs1,566.20 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.72% up at 19,992.70 points.

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Dhunseri Petrochem buys tea factory of Primax

Kolkata-based Dhunseri Petrochem and Tea Ltd said it has acquired the tea factory of Primax Tea Pvt Ltd. No financial details were provided.

"The company has purchased and taken possession of the tea factory of Primax Tea Pvt Ltd as per the agreement executed with them," the company said in a filing to the Bombay Stock Exchange (BSE).

The new factory's capacity will be expanded to 16 lakh kg per annum during winter from the existing 10 lakh kg per annum, it said.

On Thursday, Dhunseri Petrochem increased 1.53% to Rs212.95 on the BSE, while the benchmark Sensex closed 0.72% up at 19,992.70 points.
 

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