Banks are reportedly planning to defend their existing and retired employees when they are hounded by investigating agencies. Legal and financial support to bonafide bankers is welcome. Lending decisions involve judgement of risks and some calls can go wrong. Punishing an individual banker for a call taken in good faith is unfair. Banks must make a distinction between individual bankers colluding and defrauding the system and those facing charges for judgement calls on credit decisions that went wrong but were not malafide. This is not just a question of bankers taking care of themselves at the expense of the banks. Rather, bankers need this shield to continue to take lending decisions and keep credit flowing to fuel economic growth.
Sensibly, the plan, endorsed by the managing committee of the Indian Banks’ Association, is not just about bankers protecting their own interests, but also ensuring there is no paralysis in the banking system at a time investment is gradually recovering. The government is under political pressure, after a spate of bank frauds and loans that have turned non-performing, to be seen to act tough. Reportedly, nearly half of the 50-odd officers of state-owned banks against whom the Central Bureau of Investigation and other enforcement agencies have filed cases are of the rank of the general manager and above. That these banks want to challenge the action taken by government agencies is a recognition of widely-shared perception that fraud investigations could easily degenerate into a witch hunt.
Rightly, banks will not provide legal or financial support where prosecution has been initiated by government agencies based “on a complaint filed by the employee or official of the bank”. Banks must retain public confidence.