In view of the recent spate of chargesheets and arrests of bankers by several government investigative agencies, the Indian Banks’ Association (IBA), the official representative body of the Indian banking industry, has sought to buy insurance covers for bankers to ensure indemnity against frivolous charges by investigating agencies.
Bankers in the meeting held by IBA on Friday, proposed the insurance cover for bankers so that they can bear the legal expenses while fighting the alleged cases in the court of law while in service and after retirement.
The IBA is now looking to pool in banking resources to buy such insurance covers, said V G Kannan, CEO of the IBA.
Though, there are insurance products available to cover the various risks faced by the bankers while in discharging their duties, a ready-made packaged product,the way IBA wants, may not be available right now. To design such products, the reinsurers have to be roped in and a lot of information have to be provided and the bankers may not be willing to part with such informations, said R Chandrasekaran, secretary general, General Insurance Council.
“The banks individually have taken different kind of covers, but this is the first time that there is a collective demand as stated by the IBA. We will definitely look into their demands when approached formally by the IBA ,’’ said an official from New India Assurance.
Bankers, especially from the public sector have been facing the heat from the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) as these agencies look to pin the blame of record rise in non-performing assets (NPAs) on these lenders.
The demands came in the wake of the arrest of five Bank of Maharashtra (BoM) officials, including CEO Ravindra Marathe, by the economic offences wing of the Pune Police this week for allegedly colluding with real estate developer DS Kulkarni to divert money and cheat
Bankers are feeling anguished and demoralised after the recent events. The arrest of the BoM officials is the straw that has broken the camel’s back. Bankers follow certain processes in granting loans and if all these decisions are questioned that will affect credit delivery which is critical for the functioning of the economy. It is not correct to just blame the bankers for the rise in NPAs,” Kannan said.
“No procedures were followed in these arrests. These officials were picked up, taken to the police station and arrested under the stringent Maharashtra Protection of Interest of Depositors Act (MPIDA) which is not concerned with a bank. There was no sanction taken as is required for the arrest of a central government employee. Also, RBI rules say that any loan case above Rs 25 crore has to be taken up by the CBI. Even this was not followed,” Kannan said. “
“All bankers, from the public and private sectors and foreign banks have unanimously expressed anguish and concerns that bonafide banking decisions are being questioned without any proof. We will take it up at the highest levels of the government and make suggestions so that these things do not happen again,” Kannan said addressing the press after an emergency meeting of the association.
Another move will be to form a committee including retired bankers and RBI officials to ensure that charges against bankers are substantiated before being acted on by investigated agencies.