After the crisis at the Punjab and Maharashtra Cooperative Bank came to light, the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) are now investigating cases against six managing directors and Chief Executive Officers of commercial banks.

However, the central government said that there have been no arrests in any case.

Who Are Under The Radar?

ICICI Bank CEO and MD Chanda Kochhar, former PNB chief Usha Ananthasubramanian, United Bank’s ex CMD Archana Bhargava and former UCO Bank Boss Arun Kaul are under the radar of the CBI and ED.

On the other hand, the CBI has also sought prosecution of about 800 public sector bank employees, including chairpersons, MDs and executive directors of state-run entities since 2017.

In as many as 139 cases, the government had dismissed the requests for prosecution; the finance ministry informed the Lok Sabha. The ministry, however, did not respond to queries on whether the probe involved serving or ex-top bankers.

Why Is This Probe Important?

In the last few years, action against several bankers has increased. Lack of discipline and transparency along with a lax credit culture across stakeholders increased the corruption in the banking sector and the occurrence of frauds.

‘The role of bankers was not as rigorously examined earlier, and auditors were not independently regulated. Though extensive reforms, change in credit culture has been instituted, and controls have been tightened for every stakeholder in the financial system, which has enabled a tighter check on corruption,’ the government said.

These investigations become crucial at a time when Indian banks are plagued with excessive bad loans or new non-performing assets, and multiple cases of camouflaging financial irregularities have surfaced.

In the case of the PMC Bank, the scam-hit lender had fraudulently manipulated data to the central bank and concealed multiple undisclosed accounts, even though audits were carried out every month. This left thousands of depositors panicking as their life long savings and earnings were stuck with the bank.

Taking note of this, the government increased the deposit insurance coverage by five times to Rs 5 lakh as against the current Rs 1 lakh insurance to a depositor.

Focusing on increasing transparency in the banking sector, finance minister Nirmala Sitharaman said, ‘Robust mechanism is in place to monitor and ensure the health of all scheduled commercial banks, and depositors’ money is absolutely safe.’

In an attempt to ensure a committee examines bank scam cases before the CBI intervenes, a five-member advisory board was also advised to be created in January by the Central Vigilance Commission (CVC) to investigate financial frauds. The committee will operate as a first-level of examination for all banking frauds above Rs 50 crore in state-run banks and financial institutions.

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