Pratip Chaudhuri’s arrest: New rules say police needs prior nod to act against PSU officials

Pratip Chaudhuri’s arrest: New rules say police needs prior nod to act against PSU officials

A new government rule, aimed at shielding public sector officials and bankers against law enforcement overreach, has come into the spotlight after Rajasthan Police on Monday arrested former of India (SBI) chairman Pratip Chaudhuri in a decade-old bad loan case. The arrest appears to have roiled bankers, particularly those at state-run lenders.

The Department of Personnel & Training circular, published about a couple of months ago and after the arrest of

executives in another NPA case, had laid down standard operating procedures (SOPs) for action against government officials. They specified that police has to seek prior approval under the newly inserted Section 17A in the Prevention of Corruption Act (2018).

The amendment also details stage-wise processing of information by the police officer concerned and also a checklist that must accompany an application under Section 17A.

‘Banking Industry’s Confidence Shaken’

Bankers told ET that none of these procedures were followed in this case. “When something like this happens, it hits at the very base of our credit culture,” former SBI chairman Arundhati Bhattacharya told ET. “Financial institutions work as per laws and regulations laid down by lawmakers and regulators. How are people working in these institutions supposed to work when agencies take unilateral actions as in this case? To do this to someone like Mr Chaudhuri, who is known to be scrupulously honest, is very unfortunate.”

Bankers say

  • Amendment to Prevention of Corruption Act, 2018 meaningless if police’s high-handedness continues against govt officials
  • Arrest of ex-SBI chief both against statutory laws and natural justice
  • Move will hurt credit culture, prevent decision making
  • This can have a chilling impact on lower levels of banking hierarchy
  • Timing of arrest, when superior courts are on vacation, raises doubt

Chaudhuri was arrested from his Delhi residence by the Rajasthan police and taken to Jaisalmer on Monday. The case refers to the ‘Garh Rajwada’ hotel project in Jaisalmer, financed by SBI in 2007. Since the project was not completed for three years and a key promoter passed away in April 2010, the account slipped into the NPA category in June 2010. Subsequently, the loan was sold to Alchemist ARC, of which Chaudhuri became a director on superannuation from the bank.

“It is very disturbing when a senior banker, no less than the (former) SBI chairman, is arrested,” said Rajkiran Rai, CEO, UBI. “Judicial and police officials have to understand how bankers make decisions in these cases. This is just a Rs 25-crore loan we are talking about, which may not have even gone to the desk of the chairman. When such unfortunate things happen, they shake the confidence, especially at lower levels in the hierarchy.”

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