No action can be initiated against top bankers for involvement in suspected frauds before a panel formed on Wednesday by the Central Vigilance Commission (CVC) gives its nod, according to an official order.
A five-member advisory board for banking and financial frauds has been created by the CVC to act as a "first-level of examination" in respect of officers in the rank of general managers (GMs) and above.
"The advisory board for banking and financial frauds shall function as the first-level of examination, in respect of officials in the rank of GM and above in public sector banks and equivalent thereof in public financial institutions incase of frauds amounting to more than Rs 50 crore, before such organisations initiate action in matters of banking and financial frauds," the order issued by the probity watchdog said.
The board will also tender advice in respect of these top ranking officers under all relevant laws, including all composite cases, it said.
The move comes a fortnight after Finance Minister Nirmala Sitharaman had assured bankers that honest commercial decisions taken by them will be protected and a distinction would be made between genuine commercial failures and culpability.
"Banks have gone through a slightly worrying period wherein decision-making was getting difficult because of the fear of the three Cs. There was concern and bona fide decisions are not being made by banks because of what they would say undue harassment, uncalled for harassment happens because of these agencies pursuing on cases," Sitharaman had said.
Three Cs are usually referred to as the CVC, Central Bureau of Investigation (CBI) and the Comptroller and Auditor General of India (CAG).
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Giving details of the advisory board, the CVC said public sector banks and financial institutions shall continue to refer all suspected frauds to the board.
"The advice rendered by the board may be suitably considered by the competent authority while initiating criminal investigation," the order said.
All administrative ministries and entities of the government have been asked to ensure that the advice of the board "has been sought, received and made available, in respect of officials in the rank of GM and above in public sector banks and equivalent thereof in public financial institutions incase of frauds amounting to more than Rs 50 crore to the investigating agencies".
These probe agencies may take such advice into account while taking consequential action to initiate preliminary enquiry or investigation and follow due procedure under the Prevention of Corruption Act, 1988, the CVC said.
"Incase during the course of investigation, the involvement of a public servant employed in public sector banks and public financial institutions above the rank of GM comes to the notice of the investigating agency, they may refer the matter to the board for advice before proceeding further," it said.
The board will ordinarily, within a month of receipt of the initial reference, tender its advice as may be requisitioned by the ministry, department, CVC or the CBI, the order said.
State vigilance organisations have also been advised to adopt a similar framework or refer the matter to the board "in the interest of harmonious and uniform application" with respect to the matters related to the Prevention of Corruption Act, 1988, it said.
The five-member board, headed by former vigilance commissioner T M Bhasin, will have former urban development secretary, Madhusudan Prasad, former director general of Border Security Force (BSF), D K Pathak, and the then managing director and chief executive officer of Andhra Bank, Suresh N Patel as its members.
An expert from the financial sector, including banking and insurance, will be nominated to the board, the CVC said.
The tenure of chairperson and members would be for a period of two years.