Just a few days after the government told state-run banks to swiftly approve loans, the Central Vigilance Commission, or CVC, has told bankers to ensure that officers exercise due caution while evaluating such proposals.
In a mail to the chiefs of state-run banks last week, CVC - the anti corruption watchdog - said it had come to its notice that many times an officer who is in charge puts his signature on a loan proposal in his capacity as recommending officers while holding temporary charge for a short period.
While replying to the charges levied against the officers, the officer-in charge takes the plea that he has just put his signature as a formality without application of mind as he was holding charge for a short period in the absence of a regular officer, the mail from the CVC said.
The Commission has said while deciding on a case, this defence cannot be assigned weightage considering that all officers are expected to apply their mind while taking a decision and while putting their signatures in the loan application. The CVC has advised bank chiefs to ensure that officers do not sign on loan proposals without application of mind.
The letter from CVC may derail the effort of the finance ministry to nudge banks to approve loans swiftly in order to boost growth. Recent data show that the economy expanded 7.7% in the first quarter of this fiscal against 9.4% in the fourth quarter of the last fiscal. Further, loan growth slowed to 2.7% between April and August 2011 against 3.8% in the comparable period a year ago.
A senior banker on condition of anonymity said the way a bank chief conveys the CVC instruction to his officers, will play a critical role in boosting or demoralising employees.
"Already decision making is slow among PSU banks. And now many officers would hesitate to clear loan proposals. Thus officers may go into a shell if the communication is not done in the right spirit."
Some bankers say the CVC is cautious given the increasing number of corruption cases highlighted by the media. "By saying 'application of minds', CVC is implying that the officer should ensure that the project is viable. The bank sanctions money only if bank funds are secured and the application is not forged," said a senior Mumbai based general manager in charge of credit portfolio.
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