New rules to shield honest bank staff

Mumbai: Nationalised banks will adopt common staff accountability policies for loan accounts of up to Rs 50 crore, excluding fraud accounts, that turn bad on or after April 1, 2022.

This is expected to protect the bank staff taking bonafide business decisions from unnecessary harassment.

The finance ministry has issued a uniform staff accountability framework for banks to follow in cases of NPA accounts up to Rs 50 crore from the start of the next financial year.

However, banks are at liberty decide on a lower threshold of Rs 10 lakh or Rs 20 lakh, depending on their business size, for the need of examining the aspect of staff accountability.

The new norms from the finance ministry were welcomed by the bankers body, Indian Banks Association (IBA), as the framework ensures that all banks follow a common approach in dealing with staff accountability for accounts turning sour, thus, saving employees for undue hardships.

Currently, different banks are following different procedures for conducting staff accountability exercises. However, staff accountability exercise has to be carried out in respect of all accounts which turn non-performing assets (NPAs), which not only adversely affects staff morale but also puts a huge strain on the bank’s resources.

While punitive action needs to be taken against the officers having malafide intent/involvement, it is essential to ensure that bonafide mistakes are dealt with compassion. There is a need to protect the people taking bonafide business decisions in this competitive environment, the IBA said in a statement.

The new norms were issued by the ministry’s Department of Financial Services  vide its order dated October 29. Banks have been advised to revise their Staff Accountability Policies based on these broad guidelines and frame the procedures with the approval of their respective boards.

The IBA said that “at a time when the country is in need of an economic boost, slow credit delivery to industries due to the fear of implication, is a matter of concern and needs urgent address.  The new guidelines will surely boost the morale of the PSB employees immensely.”

Banks will have to complete a staff accountability exercise within six months from the date of classification of an account as NPA.

 Further, depending on the business size of the banks, threshold limits have been advised for scrutiny of the accountability by the chief vigilance officer. Past track record of the officials in appraisal/sanction/monitoring will also be given due weightage, said the IBA.