Whistle blowing in Indian Banking

Riyaz Ahmed Bhat
The term whistle blowing is a new entrant to vocabulary of  Government, corporate or financial affairs which in a common parlance is used for describing the exposure of any wrong doing of the employer or his nominee by his employee or employees. Delving into the issue of whistle blowing in Indian banking industry it comes to notice that, in terms of the RBI whistle blower policy or individual policy of various Banks, it has been prescribed that the complainants can lodge their reports with prior designated officials in the Bank regarding corruption, misuse of office or criminal actions of his superior officer or employer Bank and failure to adherence to RBI guidelines. But the whistle blower has to mention his name and address on the written or mailed complaint otherwise as per the policy the anonymous or pseudonymous complaints are not to be entertained by the designated officer. It has been left to the designated officer to keep the identity of the whistle blower concealed. Also in the policy it has been documented that the designated officer will ensure that no unfair treatment is meted out to whistle blower. The contention for such an obstruction or strict check in the hands of top management has been deemed necessary to curb lodgment of frivolous complaints of the complaining employees. Meanwhile many RTI activists working against the corruption in the governance system have expressed concern on such thinking of government or private employers. They are of the view that it is this official apathy towards the whistle blower mechanism in general and in financial sector in particular which has made them to declare it nonexistent on ground.  They also feel that the recent surfacing of the frauds in Indian Banking System would have been timely detected provided had there been an effective whistle blower’s protection available in the system. It is given to understand that by timely detection the loot, spread over a long period with active connivance from top executives, could have been averted. Despite this hurdle, the activists in banking sector are working relentlessly and are committed to blow the lid of many wrong doings by the senior executives of The Banks. These activists, endangering their own security of bread and butter along with safety of their lives are ground soldiers fighting unending battles. Till date it has remained a fact that communications to even PMO of India and State Governors have not elicited a response though authorities were alerted regarding wrong doings in Banking. In such cases the scams/Frauds later on surfaced with more damages to the system till the authorities were not awakened by the cloud bursts in banking. This attitude of the Government has developed a general perception amongst the activists that top corporate executives in India have been lobbying against whistle blowing mechanism in Indian Banks so that the voice of whistle blowers in the system is silenced. This has not only discouraged the detection on shady deals between top executives or Board members of banks but also is encouraging the submission of misleading regulatory compliances by some Banks.
To create an effective whistle blower protection mechanism the Indian regulators along with Government needs to learn from the follow up actions undertaken by US administration after the fallout of Wall Street melt down. The aftermath action there included the strengthening of whistle blower rights through enactment of Dodd-Frank Wall Street Reform and consumer protection Act which yielded better results in regulatory compliance.  In light of such an experience it is quite clear that whistle blowing in governance, corporate or financial sector has to go a long way in Indian context because the psyche of Indian authorities or corporate is still not intellectually inclined to accept the view that this is going to help in averting of major corporate financial scams. However, this is a common understanding and perception that many large corporate financial frauds could have come to limelight through insider revelation before they surfaced in form of scams causing harm to the economic/Financial system of the country. It will be again a correct understanding of the issue that any organization or system needs to ensure that there is an easy alternative route, for insiders or outsiders, to raise concerns regarding functioning of the organization or governance system, otherwise the workforce or governed will become silent flock waiting for the frauds/scams to erupt like volcanoes destroying the same system.
The contrary view of the government and corporate India that giving protection to whistle blowers will only encourage the blackmail of employer organizations or their nominees by the employees or vested interests is not tangible. The argument forwarded by them is that it is a major risk to give a license to put the trade secrets, fiduciary relationship or official secrets in open domain because the employees of the Government or organizations have an unlimited access to these documents. It is a part of history that same type of concerns had been expressed by the authorities and corporate world in the western countries but were taken care of while enactment of legislations strengthening whistle blower protection in those countries. It has also come to open now that in western economies the strengthening of the whistle blower protection has helped in bringing into lime light various unlawful/unethical practices adopted by corporate entities thus helping it in cleansing the system. These practices had been continuing in corporate world for maximizing of profits by putting the security of state or health of citizens at risk. The well documented and reported case in this direction comes from Maryland USA. In this case a senior executive of an Indian pharma company after blowing the whistle fought for five years forcing a settlement of INR 3000 crore between various government Departments and the company. During the course he was also awarded with a compensation of INR 270 crore by the Federal Court for the victimization and agony he had faced during the pendency of court proceedings.
Of late it has also been coming to light that victimization of whistle blowers has been a deterrent to encourage reporting of corrupt practices adopted by dishonest officials which has helped the scamsters and swindlers to rob Indian Financial Institutions and evade Indian criminal justice system. The whistle blowers in banks have been facing victimization on the hands of Managements by way of unpleasant postings, disciplinary actions and even terminations resulting in  loss of their employment. This has lead to accumulation of silent passive contributors of frauds amongst the bank staff who are unmoved or least disturbed by surfacing of frauds in the industry. The much talked solution of freeing the Indian corporate financial system from scams, frauds and it following the high standards of integrity with transparent governance is not going to come with enforcement of stringent subordination amongst employees but same can be envisaged through encouragement of whistle blowing mechanism and that includes giving legal and physical protection to whistle blowers alongwith strengthening the regulatory compliances for banks and FIs of the country. To begin with such process the enactment of Whistle blowers Act 2011 is a small baby step while as non framing of rules by the Government can be termed as a discouraging trend and callous attitude towards this serious issue.
(The author is General Secretary Jammu and
Kashmir Bank   Officers Forum)