Bankers Breathe Easier As Government Amends Prevention Of Corruption Act
Prevention of Corruption Act amendments make it more onerous for investigators to proceed with arrest of bankers.
India’s public sector bankers, struggling to deal with bad loans and investigative scrutiny of their commercial decisions, finally got a break this week. A long awaited amendment to the Prevention of Corruption Act was cleared by the parliament on Tuesday, easing the pressure on civil servants and bankers.
The amendments require that an investigative agency, like the police or the Central Bureau of Investigations, seek prior permission from a competent authority before arresting a former bureaucrat or a public sector banker. Earlier, this provision applied only to government officials above the joint secretary level.
The Act requires prior sanction to prosecute serving public officials. The Bill extends this protection to former officials, according to a summary of the amendments provided by PRS Legislative Research.
The amendments also redefine ‘criminal misconduct’ to cover misappropriation of property and possession of disproportionate assets, says PRS Legislative Research. This redefinition could mean that ‘abuse of position’ and ‘disregarding of public interest’ cannot alone be used as reasons for an arrest.
While some provisions in the amendments will help bankers, others may not. The amendments say criminal misconduct can also include an officers’ ‘intention’ to acquire disproportionate assets, said Amit Tandon, founder and managing director at Institutional Investor Advisory Services (IiAS)
“Earlier it was just disproportionate assets and now they are talking about intention to acquire disproportionate assets. So how does that impact the process. I would say that instead of raising the threshold it has actually lowered the threshold,” said Tandon.
Still, bankers are hopeful that changes to the Prevention of Corruption Act will ease the pressure from investigative agencies. Bankers believe that these agencies are unfairly questioning genuine commercial decisions. According to a July 17 report in the Indian Express, the number of bank officials who have either been booked by law enforcement agencies or are facing charges has risen to 50 over the last four months.
The amendment to the Prevention of Corruption Act is a welcome step for the banking industry, Rajnish Kumar, chairman of State Bank of India told BloombergQuint.
It makes it clear that an arrest can only be done in the event of quid pro quo or some malafide actions. Genuine decisions of banks will be now protected. This is what bankers had asked for.Rajnish Kumar, Chairman, State Bank of India
According to TM Bhasin, vigilance commissioner at Central Vigilance Commission, the amendments will ensure that bankers and other public sector officials can discharge their duties fearlessly and only on the basis of merit.
This would help ease any paralysis in decision making, he added. Bhasin was formerly the Chairman and Managing Director of Indian Bank.
The CVC is the nodal agency for all vigilance related issues. Once the Act is notified, we will set up some guidelines on how an offence should be dealt with and what are the kind of approvals needed before making an arrest.T.M. Bhasin, Vigilance Commissioner, Central Vigilance Commission
Public sector bankers who spoke with BloombergQuint on conditions of anonymity, believe that the fear of investigative agencies greatly limits their ability to take crucial decisions such as restructuring, haircuts or even further financing of stressed companies.
Earlier this month, the Indian Banks Association (IBA) appealed to the government to speed up the passage of the amendments to the Prevention of Corruption Act. That appeal followed the arrest of Ravindra P Marathe, managing director of Bank of Maharashtra by the Pune police. Previously, senior officials from large public sector banks such as IDBI Bank have been arrested on various charges under the Prevention of Corruption Act.
The IBA, which is an industry body for the banking sector, wrote to the finance ministry and other wings of the government seeking protection for genuine decisions made by bankers in a difficult macroeconomic situation. The IBA proposed that a committee be created, which is headed by a former banker. This committee could direct investigating agencies on how to proceed against commercial decisions.
Punishing Bribe Givers
The amended Prevention of Corruption Act also seeks to punish bribe givers, along with bribe takers, for the first time. It has raised the punishment for those found guilty of taking or giving a bribe upto seven years.
“This was a good opportunity to consider the kind of protection offered to the bribe giver. Because if you look at the bribe giver, there are coerced bribes versus collusive bribe givers. Where there is collusion, of course, you should hold the person responsible. But where it is coercive, you need to offer some kind of protection,” said Tandon.
He added that it would have helped if the amendments had laid down a certain timeframe within which these investigations have to be completed.
With inputs from PTI