The Securities Scam has exposed the weaknesses in our Banking system and highlighted and prevalence of white collar crime in our Banks. The inadequacy of the existing system and procedures of supervision by the R.B.I. and the Department of banking have been brought out clearly. The impunity with which Bank officials have betrayed the trust reposed in them and facilitated the enrichment of a private individual with public funds calls for immediate corrective action and preventive steps.

An efficient, incorruptible and service oriented Banking system is an essential prerequisite for a free economy. Where financial institutions operate in a free market environment, market forces act as levers of control. In an environment like ours, where financial institutions have been rationalised, they have become burgeoning bureaucracies with accountability to none. The supervision and inspections by RBI, Department of Banking and others, concentrate on financial and policy issues. None of them care about the scope for criminality in the existing systems/procedures. Inspections do ferret out occasionally some cases of misfeasance and malfeasance. These are dealt with as individual cases of aberrations and not as indicators of the rot in the system.

Banks lose every year, hundreds of crores of rupees in irrecoverable loans, bad debts and frauds through the active connivance of Bank employees. Very few of these cases are investigated; some by the C.B.I., State Police C.I.D. and the Vigilance Departments of the Banks. No one is wiser about the quantum of losses, steps taken to recover them, action taken against erring employees as the facts get buried under the veil of operational expenses.

To prevent the white collar crime in Banks and Financial institutions, following steps are necessary:

1. Pre-induction Honesty Tests : Pre-induction psychological tests, known as ‘Honesty Tests’, are to be made compulsory at the time of recruitment, to detect and eliminate personnel with a penchant for criminality and dishonesty.
2. Criminal Background Verification : To be made mandatory for all personnel prior to appointment.
3. Annual movable/immovable property returns : To be made compulsory for all employees. These are to be scrutinised by the Vigilance Division.
4. Personal Loss Insurance : Employees are to take a Personal Loss Insurance indemnifying and recouping the Financial institutions for a specified sum, in case the actions of the employees result in loss.
5. Random Review : to be undertaken of transactions involving the discretion of managers and higher ups to locate improprieties and lack of probity.
6. Strengthening of Vigilance Organisations : The Status, charter of work and the capacity of the Vigilance Organisations in the Financial Institutions are to be reviewed to make them more effective.

INVESTIGATIONS : All cases of white collar crime in financial institutions are to be investigated by the C.B.I. and prompt action to be taken to bring the culprits to book. A special wing of the C.B.I. should be established to deal with these cases.

It is imperative to instill confidence in the public mind that the financial institutions, the R.B.I. and the Government of India are ever alert to the need for curbing criminality. None of the steps enumerated would hinder an honest employee from fulfilling his assigned role but are meant to deter the criminal elements from operating with impunity.