The meeting assumes significance in the light of finance minister Yashwant Sinha's recent declaration that the ministry, along with new CVC, would work out a new mechanism to wipe out the shadows of fear psychosis that have been stalking the industry and put an end to the era of witch-hunting. "How would a police inspector know about the appraisal of credit proposal," Sinha wondered at the recent global banking conference in New Delhi.

Senior bankers have voiced protest against the role of the vigilance commission and singled out the arbitrary vigilance system as the primary reason behind the slack credit offtake as panic-stricken bankers refuse to take credit decisions.

According to finance ministry sources, Sinha wants to sort out theproblem on a war-footing and put a new vigilance manual in place before the end of the fiscal. RBI governor Jalan is also very keen on removing this "bottleneck," sources said.

The ministry is expected to follow the recommendations of the second Narasimham panel on banking sector reforms in this regard.

The Narasimham panel report has urged the government to "redefine" the scope of external vigilance and investigative agencies in regard to banking business.

The report has underscored the fact that external agencies should have requisite expertise to take into account the commercial environment in which the decisions are taken.

The vigilance manual now being used, according to the panels, has been designed mainly for use by government departments and public sector undertakings and the concept of loss arising from a credit decision taken in good faith should not be seen as akin to the concept of loss to the government which is central to the manner in which the vigilance authorities in the governmentapproach their task.

Former finance minister P Chidambaram took the initiative to set up an advisory board for bank frauds. However, the scope of this board -- headed by former RBI deputy governor SS Tarapore -- is confined to functions of only senior bank executives.

CVC must have bankers: While a new vigilance manual designed to take the special features of the banking industry into account will be welcome to bankers, it is doubtful to what extent it will remove unnecessary harassment. In the final analysis, it is practising bankers who have been exposed to the same risks who will be best able to appreciate such cases. There is a case, therefore, for staffing the Vigilance Commission with bankers on deputation. In addition, while kudos need to be given to investigators for successful prosecution, cases which do not stand up in a court of law should conversely attract adverse comments on their appraisal reports.