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Banking Central| How are state-run banks treating their young bankers?

PSB managers blindly follow instructions from bureaucrats and target junior officers at the slightest hint of trouble. It is time to shun this ham-fisted approach and carve an independent path

September 13, 2021 / 12:09 PM IST

A leading state-run bank recently transferred a zonal manager from Bhopal to Kolkata for refusing to take action against three young probationary officers (POs) in a loan fraud case.

A corporate loan was sanctioned to a businessman engaged in energy business on the recommendation of the junior officers reportedly under pressure from their seniors. The loan, which was co-lent by other leading state-run banks, went bad and this particular bank classified it as a case of loan fraud.

Typically, when a loan is tagged as fraud, the bank needs to pass on the case to investigators to look into the role of the branch head or officers and violation of rules, if any. But the bank wanted to prosecute the three POs as well.

The bank needs to give permission to the investigators to prosecute its officers but the zonal manager repeatedly refused the go-ahead for action against the POs. He assessed that they acted under pressure from seniors in recommending the loan. The zonal officer argued that action against junior officers was unwarranted.

Why target juniors?

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So, who is right? Shouldn’t the bank have acted in line with the decision of the zonal manager and spared the young officers? Are they guilty of recommending the loan if there was pressure from the top?

The officer’s stand irked the bank and the babus in Delhi. The zonal manager was shunted to Kolkata in what bank employee unions have as a high-handed decision.

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“In this case, the zonal manager could have been asked to give an explanation about his refusal. Instead, he was subjected to punitive action. This is high-handedness and will have a disastrous impact on bank officers in future when it comes to taking business decisions,” All India State Bank Employees Association general secretary CH Venkatachalam said.

He has a point. “If probationary officers who are at the starting point of their career are prosecuted for doing what is essentially an order from the seniors and a zonal manager is penalised for supporting his subordinates for a genuine reason, it will send a wrong signal to the young officers. The zonal manager in question could have easily let the names pass and be in the good books of his bosses but, he didn’t,” he said.

The bank’s management merely followed verbal instructions from the government officials and acted against the officer.

There needs to be a thorough probe into this incident to ascertain who is guilty. The zonal manager’s refusal to prosecute junior probationary officers was well-intended. After all, these were only probationary officers. If investigators are let loose on innocent bank officers, it will result in a fear psychosis that can slow down credit decisions. It will have a bearing on the credit flow, which is already slow, to productive sectors of the economy trying to come out of the blow dealt by the coronavirus pandemic.

Public sector banks still operate as extensions of the finance ministry and seem to have no mind of their own. The “directions” from the bureaucrats are forced on bank officers.

There are bank heads who go the “extra mile” to ingratiate themselves with their bosses in Delhi in the hope of plum assignments after retirement. This enables a “feudal culture” —the powerful use loyalists to have their way—and arbitrary actions against those in the middle and junior rungs. Such a culture doesn’t augur well for PSBs if the idea is to compete with private sector banks.

These institutions need to act as independent organisations and build confidence among their staff to make business decisions. Bankers cannot work in fear.

(Banking Central is a weekly column that keeps a close watch and connects the dots about the sector's most important events for readers.)
Dinesh Unnikrishnan is Deputy Editor at Moneycontrol. Dinesh heads the Banking and Finance Bureau at Moneycontrol. He also writes a weekly column, Banking Central, every Monday.
first published: Sep 13, 2021 12:09 pm

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