The panel will review cases of financial fraud involving general managers in state-run banks and financial institutions before any action is initiated by the organisations involved.
The five-member panel headed by T M Bhasin, ex-chairman & managing director of Indian Bank and a former vigilance commissioner, will also provide advice on all cases of financial fraud under the relevant laws.
The move comes after experts and industry leaders flagged the concerns during their recent meetings with Prime Minister Narendra Modi, where they cited instances of investigative agencies hounding the corporate sector and bankers.
For instance, Mahindra Group chairman Anand Mahindra is learned to have pointed to the CBI booking Carnation founder Jagdish Khattar, the former Maruti chief, for a loan fraud as a case where genuine business failure was being punished.
Similarly, Bharti Group chairman Sunil Bharti Mittal had also flagged this as a concern, which came weeks after Rahul Bajaj raised the issue of “fear” in corporate India before home minister Amit Shah, who was present at the annual ET Awards with finance minister Nirmala Sitharaman and commerce & industry minister Piyush Goyal.
During a separate closed-door meeting with the PM, bankers and market experts, the issue of bank chiefs being made personally liable for loans turning bad was raised, with some bank chiefs suggesting that decision-making had come to a halt as they did not want to face action for genuine business decisions.
Modi had assured that honest bank officers would be shielded from investigative agencies in cases of bona fide business decisions. Nirmala Sitharaman, too, had sought to comfort bankers over their fears of arbitrary action by investigative agencies and had invited CBI chief RK Shukla for a meeting with bank chiefs last month.
The new panel is an improvement on a committee under Bhasin, which was set up last August. The CVC had set up the advisory board on banking frauds after consultations with the RBI based on the recommendations of the expert committee on NPAs and frauds.
“Now, in view of the increasing complexities and issues arising or difficulties being faced in technical matters, it has been decided to rename the board as advisory board for banking and financial frauds,” the CVC order said. State vigilance commissions have also been advised to follow a similar approach.
The government is keen to ensure speedy decision-making and accelerate bank lending to boost overall economic growth, which is estimated to slow to 5% in 2019-20, the slowest pace in 11 years.
A CVC order said all public sector banks and financial institutions shall refer all matters of suspected fraud of over Rs 50 crore linked to public servants equivalent to the rank of general manager and above to the board for advice before initiating an inquiry or investigation.
It said all administrative ministries, organisations and entities of the government shall ensure that the advice of the board has been sought and made available to the investigative agencies, which may take such advice into account while initiating an action or preliminary inquiry.
In case during the course of the investigation, the involvement of a public servant above the rank of GM comes to the notice of the investigative agency, they may refer the matter to the board for advice before proceeding further.
Apart from Bhasin, other members on the board are former urban development secretary Madhusudan Prasad, former Border Security Force director general D K Pathak and Andhra Bank former MD & CEO Suresh Patel. The fifth slot would be filled with an expert from the financial sector.