President asks bankers to uphold high standards of probity

With the bribe-for-loan scandal still fresh in public memory, President Pratibha Patil on Thursday asked bankers to uphold the “highest standards of probity” and follow prudential principles for lending. “Bankers and money managers have a responsibility to follow principles of prudence and risk management,” Patil said in her address at an event to kick-off the centenary celebrations of the Central Bank of India here.

Banks were obliged not to take “unbridled risks” with the common man’s hard-earned money and “some recent odd aberrations” should be a warning for all the banks to check their procedural and monitoring mechanisms, she said.

While approving loans by competent authorities, banks must adhere to all procedures and conduct due diligence consistent with the approved guidelines, the President said.

She said the banks played an important role in building transparent and accountable systems, which could contribute in preventing financial improprieties, including dealing with corruption in some cases.

The comments come within a month of the arrest of seven people, including the Chief Executive of LIC Housing Finance, in connection with the scandal.

According to the Central Bureau of Investigation, senior officials from public sector lenders accepted bribes through middlemen to clear loan proposals of large corporates. The names of many public sector lenders and a slew of beneficiary corporates also tumbled out post the arrests.

Bankers have maintained this was an isolated case of wrongdoing by some individuals and clarified the expose did not point to any systemic risk.