Govt Unveils Staff Accountability Rules for NPA Accounts of Up To Rs 50 Cr

The Ministry of Finance has published a standard staff accountability approach for NPA accounts up to Rs 50 crore, which will take effect on April 1, 2022, for accounts that become non-performing assets (NPAs) in the next fiscal year. The Department of Financial Services (DFS), under the finance ministry, "advised broad guidelines to be adopted by all public sector banks (PSBs) on 'Staff Accountability Framework for NPA Accounts up to Rs 50 crore' (Other than Fraud Cases)" in an order dated October 29, according to the Indian Banks' Association (IBA).

Banks have been recommended to alter their rules on employee accountability. These rules will ensure that bankers may be penalized if a legitimate commercial choice goes awry. According to the IBA, it will also assist bankers in making credit decisions more quickly and promote the economy. The IBA further said that banks must complete the employee accountability process within six months of the account being classified as NPA. It also stated that, based on the size of the bank's business, threshold limitations for the chief vigilance officer's monitoring of accountability have been recommended.

The IBA stated in a statement that the officials' previous track history in the appraisal, sanction and monitoring will be given appropriate consideration. "At present, different banks are following different procedures for conducting staff accountability exercises. Also, staff accountability exercise is being carried out in respect of all accounts which turn into NPA. "This approach not only adversely affects staff morale but also puts a huge strain on the bank's resources," according to IBA.

According to IBA "while punitive action needs to be taken against the officers having malafide intent/involvement, it is essential to ensure that bonafide mistakes are dealt with compassion." It further clarified that "there is a need to protect the people taking bonafide business decisions in this competitive environment."

Furthermore, the IBA stated that at a time when the country requires an enormous stimulus, sluggish credit delivery to companies owing to fear of repercussions is a source of worry that requires immediate attention. It stated that banks, with the agreement of their board, may set a threshold of Rs 10 lakh or Rs 20 lakh, depending on the size of their company, for the purpose of reviewing the element of employee accountability.