As New Delhi moves to tighten scrutiny of India’s state-owned lenders, a fresh directive from the finance ministry has placed unprecedented emphasis on real-time disclosures from bank leadership. The order, prompted by a high-profile case involving UCO Bank’s managing director, reflects growing concern in the government over lapses in vigilance reporting and the opaque handling of internal investigations.
A Heightened Alert in India’s Lending Ecosystem
Seeking to reinforce oversight across the public-sector banking network, the finance ministry has instructed state-owned banks and financial institutions to immediately flag any adverse developments involving whole-time directors or board-level executives. The directive, reviewed by The Economic Times, follows a series of recent episodes in which senior officials remained in key decision-making roles even as investigative agencies pursued serious allegations against them.
The UCO Bank Case That Triggered the Directive
At the heart of the new guidance is the case of Ashwani Kumar, the managing director and chief executive of UCO Bank. Kumar continues to serve in his post despite the Central Bureau of Investigation filing a chargesheet against him in connection with the Lal Sons Jewellers loan account an alleged irregularity dating back to his tenure at the former Oriental Bank of Commerce (OBC), now merged with Punjab National Bank.
On November 11, a CBI special court directed Kumar to post a ₹50,000 bond and barred him from leaving the country or influencing witnesses. The agency told the court it had not arrested him because OBC failed to cooperate fully in the investigation and did not grant mandatory prosecution approval—an omission that raised concerns within the finance ministry.
The episode has underscored the challenges the government faces when senior banking officials remain in key roles even as legal proceedings advance around them, raising questions about institutional transparency and the quality of information reaching policymakers.
A Push for Comprehensive Disclosure
A December 5 ministry letter reviewed by ET ordered banks to share all relevant information when seeking vigilance clearance for senior executives. The directive expands the scope of required disclosures to include:
- Court or tribunal directions
- Serious audit findings
- Internal committee observations
- Communications from investigative agencies
- Complaints, court remarks, and references from bodies such as the CBI
The ministry also instructed banks to maintain updated vigilance-clearance profiles to prevent “incorrect approvals” at high levels of decision-making.
Under current rules, banks must submit quarterly status reports on vigilance cases pending for more than six months not only to the finance ministry but also to their own boards. But the government’s latest instruction suggests that routine reporting is no longer adequate in cases involving senior leadership or significant investigative developments.
Building a Stronger Framework for Accountability
The ministry’s directive appears to reflect a broader recalibration of oversight mechanisms across public-sector banks. Officials have argued that timely and comprehensive reporting is necessary to avoid situations in which major decisions such as promotions, appointments, or strategic lending approvals are made without full knowledge of ongoing legal or vigilance concerns.
By placing responsibility squarely on boards and senior management to escalate adverse findings without delay, the government aims to reduce gaps between investigative proceedings and executive oversight gaps that, as recent cases suggest, can have far-reaching implications for public trust and financial governance.
