Public sector banks may follow a uniform practice on employee accountability for bad loans

Public sector banks may follow a uniform practice on employee accountability for bad loans and other risk-oriented business calls to prevent potential witch-hunts in the guise of probing lapses.
Indian Banks’ Association (IBA) has formed a committee under Canara Bank executive director MV Rao to look into the nuances of staff accountability. The panel will recommend steps that will be adopted by the lenders.

“We feel that regulations related to discipline and conduct need to undergo a paradigm shift,” said Soumya Datta, general secretary, All India Bank Officers’ Confederation. “There should be clear demarcation between minor and major misconducts, and witch hunting of officers for minor or no apparent lapses should be stopped.”

The decision comes at a time when bankers at different levels are wary of taking business decisions over concerns of future probes if any of the commercial decisions, despite being bonafide, fails to meet pre-set financial milestones. The economy has been suffering from slow credit delivery to industries when it needs funding to kick start the revival.

Bank credit to industries decelerated 1.7% year-on-year to October 23, while overall credit expanded only 5.5% in the same period. The RBI and the government have on several occasions mentioned the need to end the fear psychosis among bankers to propel lending and economic revival.


Staff accountability for frauds is another serious issue nowadays, and the Reserve Bank of India (RBI) has told banks to set rules in this regard.

The uniform policy may be drafted taking the best practices from different banks, two people close to the development said. Discipline and appeal regulations will also be looked into. The HR practices in State Bank of India and Punjab National Bank are the most comprehensive, according to senior bankers.

The matter was discussed at a meeting by IBA Monday with four officers’ associations in presence of several bank bosses, including Union Bank of India chief executive Rajkiran Rai, State Bank of India deputy managing director Alok Kumar Choudhary, IDBI Bank CEO Rakesh Sharma, Uco Bank CEO AK Goel, and Federal Bank CEO Shyam Srinivasan.

Gross non-performing assets (NPA) at the aggregate level improved to 7.5% at the end of September this year, from 8.5% at end of March 2020 and from 11.5% at end of March 2018, but may rise again due to the pandemic-led disruptions.

At the meeting, matters related to 5-day banking operations and updation of pensions were also discussed. IBA said that the demand for 5-day banking will be deliberated with the government and RBI. On pensions, the bank management body has hired an actuary to look into the demand placed by bank associations.