The Finance Ministry has instructed public sector banks and financial institutions, including insurance companies, to promptly report vigilance-related issues concerning whole-time Directors on their boards. The directive emphasizes the importance of disclosing all relevant information for decisions regarding appointments, promotions, and board-level placements of whole-time Directors. Strict compliance with these reporting requirements is expected from all public sector undertakings (PSUs).
The directive follows instances where crucial information about board-level appointees was not reported in a timely manner. It highlights that significant adverse inputs, such as private complaints, court observations, or inputs from law enforcement agencies, are sometimes only reported when vigilance clearance is sought from the Chief Vigilance Officers (CVO) of PSUs during promotions or appointments.
The advisory issued by the Department of Financial Services (DFS) this month stresses the need for immediate reporting of adverse inputs concerning board-level officials, even if the alleged lapse occurred in a capacity other than the board. Public sector banks and financial institutions are required to provide comprehensive disclosures in vigilance clearance, including court or tribunal observations, serious audit findings, and communications from relevant departments or agencies.
The DFS has mandated that CVOs ensure vigilance clearances reflect the most current and accurate status at the time of issuance, without any suppression of material information. This move aims to prevent situations like the one earlier this year, where the promotion of a Union Bank of India Executive Director to General Manager of Punjab & Sind Bank had to be reversed due to a lack of vigilance clearance. The decision was made in light of a Delhi High Court case alleging norm violations in the Executive Director’s appointment.
