The Centre is planning to bring another set of amendments to the Prevention of Corruption Act 1988 to assuage the concerns of bankers, who fear post-retirement harassment by investigation agencies for bonafide decisions gone wrong. The move is aimed at improving the credit climate, seen as crucial for supporting high economic growth.

According to official sources, a high-powered meeting has been called by the government to discuss the report of a committee formed by the Indian Banks Association (IBA) to look into aspects related to Section 17A of the Prevention of Corruption Act, 1988 (as amended in 2018).

The meeting will be attended by the financial services secretary, CBI director, officials from Department of personnel and training, home ministry, RBI deputy governor, SBI chairman, other MD/CEOs of other public sector banks, IBA chief executive and CVOs of public sector banks, the sources said.

In 2018, the Narendra Modi 1.0 government had amended Section 17 of the PC Act, whittling down some of its intrusive provisions, and encouraging bureaucrats to take right decisions in national interest without undue fear of prosecution or harrassment. As per one of these amendments, it requires a police officer to obtain prior approval from a competent authority before investigating a public servant for an alleged offence under the PC Act to prevent frivolous investigations.

Accordingly, the Central Vigilance Commission set up the Advisory Board for Banking and Financial Frauds (ABBFF) to vet corruption cases before prosecution is sanctioned. The ABBFF examines all bank fraud cases of Rs 3 crore and above involving officers in the rank of Assistant General Manager and above.

However, there have been cases when senior bankers face police arrest without sanction, both serving and retired, giving rise to concerns. Former SBI chairman Pratip Chaudhuri, for instance, was arrested by Rajasthan police in a loan scam case in 2021. In 2018, Maharashtra police had arrested the CEO and MD of the Bank of Maharashtra.

“Unless and until there is a clear-cut involvement of senior officers in a case, the matter should not be referred to CBI. How it will be done, needs to be worked out,” a senior official said, without elaborating.

Also, public sector bankers want protection for their top management on the lines of the National Bank for Financing Infrastructure and Development (NaBFID), which was set up through an Act in 2021. The competent authority will be the Union government if the offence is alleged have to been committed by the Chairperson or other directors of NaBFID. The protection of NaBFID top brass was aimed at providing a conducive environment to the proposed development financial institution for infrastructure financing.

“This will help faster decision-making in loan processes to improve credit climate and address the fear of bankers of harassment post-retirement,” the official said.

After the gross non-performing assets (GNPA) of the PSBs rose to a record 14.5% as of March 2016, the government took a slew of measures such as strengthening the banking regulatory framework, amending the recovery laws, enacting comprehensive insolvency and bankruptcy legislation, and establishing a public sector asset reconstruction company. These measures have nursed the credit sector back to sound health, and the GNPA ratio shrunk to 2.8% in March 2024.