The proposal of the Government of India to set up a SPECIAL BUREAU to deal with bank frauds, though well intentioned, is likely to fail in its objectives due to inherent administrative and legal requirements in the investigation and prosecution of a case of Bank Fraud. If the new Bureau is to make provisions to take care of these requirements, it would need enormous manpower and money. Prudent dictates that instead of creating another mammoth Government department, it would be cost effective and efficacious to strengthen the Central Bureau of Investigation by induction of qualified professionals - Bankers, C.As., Financial Analysis - and direct the C.B.I. to set up a BANK CRIMES DIVISION at Bombay to deal exclusively with Bank Frauds and allied crime and work in close liaison with R.B.I. and the corporate headquarters of Nationalised Banks.

Frauds take place when in a human interaction one party intentionally seeks to gain a dishonest advantage of the other. Frauds signify breach of trust. Frauds in Banks are made possible by collusion of the Bank Staff, absence of effective supervision and gross negligence and flagrant violation of established procedure by the Bank staff.

Thus, there are two angles in a Bank Fraud, the criminal and the administrative. In our country, employees of Nationalised Banks are public servants and a high level of probity is expected of them. Failure on their part would attract the attention of Prevention of Corruption Act. Bank employees are expected to assure the public, security of their money and efficient service. Frauds undermine the trust of the public in the entire banking system.

Bank frauds in general are detected during inspections, internal audit and enquiries into complaints from public of malpractices by the staff. When detected, these are further processed by the Vigilance Departments of the Banks, who after establishing a prima facie case bring the matter to the notice of the C.B.I. or the Crime Branch of the State Police for formal investigation and prosecution. At the investigation stage, the vigilance organisation of the Bank generally affords all the assistance expected from the bank by the investigating agencies. C.B.I. has an ongoing day-to-day liaison with the vigilance organisations of the Banks. C.B.I. has an in-house legal department which gives constant guidance and clarifications on legal questions to the investigations.

In addition, C.B.I. has in-house facilities for forensic examination of documents, polygraph testing etc. to aid the investigators. There are exclusive designated Special Courts all over the country to deal with CBI cases, which will ensure speedy disposal of cases. Presence of CBI all over the country would ensure prompt and simultaneous action Nationwide in complex and difficult cases like the present Security Scam.

Notwithstanding all these advantages, CBI personnel lack ‘expertise’ and ‘knowledge’ of ‘Banking’ and ‘Economic Affairs’. This lacuna could be easily overcome by inducting into CBI as ‘Advisors’ senior Bankers, C.As. and Financial Analysts. Like legal advisors, they will guide the investigators in the nuances of the Banking practices, procedures and operations.

Our Criminal Justice system is based on ‘Due Process’ model where importance is given to compliance with legal procedures. Thus if the case is to stand judicial sanction, compliance with provisions of Criminal Procedure Code and the Indian Evidence Act is required. This calls for the expertise of a trained crime investigator.

Thus, practical advantages dictate that there is no need to establish a SPECIAL BUREAU but there is crying need to strengthen the CBI and establish a separate BANKING CRIME DIVISION in that organisation. The new Division should be headed by a Senior Reserve Bank of India official on deputation to CBI.