FinMin Tightens Scrutiny: Banks Told To Flag Red Flags On Top Officials Immediately

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Tightening oversight in the lending ecosystem of India, the finance ministry has instructed state-owned banks and financial institutions to immediately flag any adverse developments involving whole-time directors (WTDs) or board-level officials, as reported by ET.

The order follows UCO Bank MD & CEO Ashwani Kumar, who remains in his post, despite CBI filed a chargesheet against him. Kumar has been alleged in the Lal Sons Jewellers loan account during his earlier stint at Oriental Bank of Commerce (OBC), now merged into Punjab National Bank.

A CBI special court on November 11 directed Kumar to post a Rs 50,000 bond and barred him from leaving the country or influencing witnesses. The CBI informed the court that it did not arrest him due to OBC’s lack of cooperation and the bank’s refusal to grant the mandatory prosecution approval.

According to a December 5 finance ministry letter reviewed by ET, the finance ministry ordered banks to share all relevant information while seeking vigilance clearance for senior executives, which includes court or tribunal directions, serious audit findings, internal committee observations, and communications from investigative agencies.

It also added that complaints, court remarks, and references from agencies such as the CBI must be reported to the ministry immediately.

The ministry also told to ensure comprehensive disclosure and maintain updated vigilance clearance status to avoid incorrect approvals at the highest level of decision-making, as reported by ET.

Under current rules, for vigilance cases pending beyond six months, banks are required to send a quarterly status report to the finance ministry, apart from updating their own boards.