1. Three Broad Aspects of Vigilance

2. What Is a “Vigilance Angle”?

This is one of the most important concepts for a bank employee to understand.

Not every mistake, procedural irregularity, loan becoming NPA or financial loss to a bank automatically becomes a vigilance case.

Certain types of misconduct have an obvious vigilance character — for example bribery, misappropriation, forgery, cheating, abuse of official position for improper pecuniary advantage or other conduct directly affecting integrity.

In other situations, the surrounding facts and circumstances have to be examined carefully. Factors which may require closer vigilance examination can include:

• gross or wilful negligence;
• recklessness in decision-making;
• flagrant or deliberate violation of systems and procedures;
• improper exercise of discretion or acting beyond delegated powers;
• failure to keep the competent authority informed where required;
• undue or unjustified delay;
• undue loss to the organisation accompanied by gain to another person or party; and
• circumstances which reasonably raise questions regarding integrity.

3. A Bad Decision Is Not Necessarily a Vigilance Case

This distinction is particularly important in banking.

Bank officers routinely take commercial decisions involving credit, recovery, settlements, securities, valuation and business risk. Some decisions will subsequently prove unsuccessful.

Useful questions include:

• What information was available when the decision was taken?
• Was the officer acting within delegated authority?
• Were applicable procedures substantially followed?
• Were relevant risks considered?
• Was the decision and its reasoning appropriately recorded?
• Was any material information concealed, ignored or misrepresented?
• Was there an improper benefit to the employee or another party?
• Was the decision bona fide?

Vigilance administration should strengthen responsible decision-making. It should not create a culture in which employees become afraid to take legitimate commercial decisions merely because every decision carries some business risk.

4. Where Can a Banker Become Vulnerable?

Vigilance risk can arise in activities involving authority, discretion, money, customer interests or control over the bank’s assets.

Examples may include:

• credit appraisal, recommendation and sanction;
• deviations from sanction terms or policy;
• documentation and creation or release of security;
• loan disbursement and post-sanction monitoring;
• recovery, compromise and settlement decisions;
• KYC, account opening and customer due diligence;
• cash and transaction operations;
• procurement, tenders and vendor selection;
• expense approvals and use of delegated powers;
• handling complaints and sensitive information;
• conflicts of interest;
• bypassing important controls; and
• failure to report a significant irregularity where reporting is required.

5. One of the Best Safeguards: Record Your Reasoning

Many transactions are examined years after the original decision. By then employees may have transferred or retired, memories may have faded and the eventual outcome may make an earlier decision look very different from how it appeared at the time.

A contemporaneous record can therefore be extremely important.

This does not mean writing defensive notes on every routine transaction. It means that important decisions involving material judgment, deviation or unusual circumstances should be capable of being understood from the record itself.

6. Following Procedure — Without Becoming Mechanically Procedural

Systems and procedures exist for a reason. Deliberately bypassing important controls can expose both the institution and the employee.

At the same time, banking cannot become a purely mechanical exercise in which an officer believes that ticking every box removes the need for professional judgment.

Where a deviation is genuinely necessary and permitted, it should normally be exercised or approved by the competent authority and appropriately recorded.

7. Pressure From a Senior Is Not a Substitute for Authority

Employees may sometimes face situations in which an action is informally suggested or expected by a superior.

It is important to distinguish between:

• an authorised instruction given within the applicable framework; and
• an instruction which appears inconsistent with rules, delegated powers or important controls.

Where an instruction appears materially irregular, the employee should use the bank’s appropriate reporting or escalation mechanism rather than silently proceeding on the assumption that responsibility belongs entirely to the person who gave the instruction.

8. What Should You Do If You Notice a Serious Irregularity?

Do not panic, reach premature conclusions or start conducting your own unofficial investigation.

An employee’s role is generally to report and cooperate through the prescribed mechanism. Determination of responsibility should be left to the competent authority.

9. Audit Observation, Staff Lapse and Vigilance Angle Are Not the Same

10. Preventive Vigilance in Day-to-Day Banking

Preventive vigilance does not always require a special vigilance exercise. Much of it is simply good banking practice.

• Maintain segregation of duties and maker-checker controls where applicable.
• Verify before authorising.
• Review exception reports and unusual transactions.
• Give attention to repeated audit observations.
• Maintain proper custody and access controls.
• Stay updated with relevant rules and procedures.
• Escalate material exceptions through appropriate channels.
• Avoid conflicts of interest.
• Do not allow familiarity with customers, vendors or colleagues to dilute controls.
• Use technology and monitoring tools appropriately.

Technology can reduce some vulnerabilities, but it does not eliminate the need for human judgment, responsibility and accountability.

11. Ethics and Conflict of Interest

Rules cannot anticipate every situation an employee may face.

Particular care may be required where personal relationships, financial interests, gifts, outside influence or other circumstances could affect — or appear to affect — impartiality.

Where a material conflict exists, appropriate disclosure, recusal or escalation may be safer than attempting to manage the conflict privately.

12. Complaints and Vigilance

A complaint is information requiring appropriate examination. It is not proof that the allegation is true.

Vigilance systems therefore have to balance two important considerations:

• genuine allegations should be examined appropriately; and
• an employee should not be presumed guilty merely because a complaint has been made.

Complaints may come through different channels. Special procedures also exist for qualifying protected disclosures under the Public Interest Disclosure and Protection of Informers (PIDPI) framework.

13. Role of the Central Vigilance Commission

The Central Vigilance Commission (CVC) is the apex vigilance institution within its statutory and advisory jurisdiction.

Its framework deals with vigilance administration, preventive vigilance, complaints, disciplinary matters and related areas for organisations and categories falling within its jurisdiction.

Public sector banking has an important place within the vigilance framework. However, the CVC does not replace a bank’s management, disciplinary authorities or internal vigilance machinery.

The concerned bank’s Chief Vigilance Officer, Vigilance Department and competent authorities continue to perform their respective functions under the applicable framework.

14. If You Receive an Explanation, Questionnaire or Charge Sheet

Receiving an audit questionnaire, explanation call, show-cause notice or charge sheet should be treated seriously — but it should not automatically be treated as a finding of guilt.

Start by understanding:

• What exactly is alleged?
• Which act or omission is attributed to me?
• What was my role and authority at the relevant time?
• Which rule, instruction or procedure is alleged to have been violated?
• What documents and information existed at that time?
• What does the contemporaneous record show?
• Is the allegation being judged mainly from the eventual outcome?
• What was reasonably knowable when the decision was actually taken?

Practical Vigilance Checklist for Bank Employees

Before taking an important, unusual or discretionary decision, consider asking yourself:

If these questions can be answered satisfactorily, vigilance should support sound and responsible decision-making rather than discourage it.