Mumbai: After a four-year stint at the Central Vigilance Commission (CVC), Ranjana Kumar stepped down on Monday. Kumar, who was commissioner at India’s apex vigilance agency, began her career as a probationary officer at Bank of India in 1966, going on to occupy several top posts. These included heading National Bank for Agriculture and Rural Development, or Nabard, and Indian Bank.
Stricter vigil: Former vigilance commissioner Ranjana Kumar says there is a need to strengthen the internal audit system of public sector firms. Ramesh Pathania / Mint
The first woman to become the head of a public sector lender, Kumar was instrumental in turning around the Chennai-based Indian Bank, which had the dubious distinction of having wiped out its net worth by posting massive losses.
In an interview, Kumar talks about vigilance, public sector culture and the role auditors play. Edited excerpts:
Is there too much of corruption in high places?
There is corruption. The systems are in place but they need to be strengthened. At times, the systems, being ambiguous and often archaic, are interpreted in the way a person wants to. And there lies the problem.
For instance, when a committee evaluates a tender, there is a chairman of the committee and there are members and I believe that all are responsible (for taking decisions). The idea is to get the collective wisdom by virtue of their experience, and also they need to hold collective responsibility. So even if one member keeps quiet, he/she cannot be pardoned if a serious misgiving happens.
How often do such things happen?
I cannot tell you how many times but these things do happen. In case of tendering, a company appoints a contractor to execute the tender and also hires a consultant whose key responsibility is to monitor the timeliness and quality of the execution. We often find that nobody in the organization is monitoring whether the consultant is doing his job or not. And we should not forget that often a huge amount of money is involved.
But that consultant has been hired following norms laid down by you.
I am not disputing that. I am only saying that having hired a consultant, you ought to monitor his job. Very often, you will find that the contract does not even have provisions of penalties for delay in execution or cost overrun.
Where do you find such things happening?
In several PSUs (public sector units)...
You always insist that the contract should be given to the lowest bidder or L1.
No, that’s a misnomer. We tell them to spell out the pre-qualification requirements that have to be complied with. These requirements are in terms of quality of the product or service, experience of the contractor, adherence to time schedules and so on. The criterion of L1 is only applied to those contractors who meet the stated requirements.
How do you discover wrongdoing?
We inspect through our technical department. It’s true that our surprise inspections do not even cover 10% of the works but we are still finding serious lacunae. You can well imagine what would be the outcome if every project is verified and checked. I can tell you, in the last three years, sizeable recoveries were made as penalty from the contractors for poor quality as well as delay in the execution of projects.
How much importance do you give to anonymous letters?
When anonymous letters are received, we tell the organization to first send it to us with their opinion. An organization cannot close an anonymous letter without referring to us. We decide on the nature of future action.
How often do you process them?
Earlier, the commission had taken a view that anonymous letters need not be pursued. But over a period of time, we realized that not too many people in our country complain because they are scared of the consequences of their identity being revealed. A person who is risking losing a contract does not complain; he uses a third party to do so. That’s why in the overall scenario, I think this is a right decision by the commission that wherever there is verifiable data, we must act on an anonymous complaint.
Recently, the commission put its foot down over the candidature of a very senior banker for a critical position in the financial sector.
I would not like to comment on specific cases. However, when complaints, written or anonymous, are received, the commission verifies before forming a view on that person’s candidature. In case of complaints against the chief executive of an organization, we share our views with the concerned ministry before any decision is taken.
The specific ministry under which the concerned PSU falls.
How often do you see a lack of integrity in senior executives?
It is not common but it does happen. In most cases, the lower and middle level operating officers are identified for penalties but my contention is what were the controlling officials doing? They have a role in supervision, control and monitoring. Barring some unique situations, I strongly believe that this is a case of collective responsibility of all levels. Delegation does not mean abdication of responsibility.
So you want everybody to follow norms and nothing should be left to discretion?
Not really. When a deviation from the norm is required, the concerned official can certainly use his/her discretion, provided it is made clear why the deviation was required, what was the consequence of not allowing the deviation and that the decision was in the organization’s interest.
I would also like to add that the role of senior officials in grooming their subordinates into taking quick and sensible decisions would go a long way in adding to their confidence and quality of governance. In the banking industry, such a culture will lead to improving succession planning.
Is that the CVC’s lookout?
Well, wouldn’t you say that an ounce of prevention is better than a few pounds of cure?
Why are bankers and other PSU bosses so scared of CVC?
They have no reason to be scared. After all, it’s the PSUs that suggest the quantum of punishment to CVC. And there have been instances when CVC has actually reduced the penalty recommended after studying the facts of the cases. And let’s not forget that a case is only built when someone in the PSU violates their own policy.
I have heard that many a time auditors do not do their jobs properly.
The internal audit of PSUs is weak. There is a pressing need to strengthen the internal audit system before the situation goes out of control.
There are problems with certain CA (chartered accountant) firms in their certification of balance sheets of borrowing companies, resulting in banks taking the wrong decisions. When complaints are made to the Institute (of Chartered Accountants of India—Icai), there is generally an inordinate delay in taking action against such members. There is, sometimes, the possibility of a collusion between the CA and the borrower. That is why such cases are referred to CBI (Central Bureau of Investigation). Banks also write to RBI (Reserve Bank of India) and IBA (Indian Banks Association) on the issue.
Will you name the auditors?
I would not like to mention names, but I think Icai has got to respond more speedily to these issues to serve as a deterrent.
You are not getting cooperation from Icai?
The commission does not need cooperation. Banks have to do it. They will have to consider whether to blacklist the individual chartered accountants or the entire firm.
So you are saying that there are many Satyams (accounting frauds) around?
Not that severe…but there have been cases.
Why don’t you talk about it?
In all such cases, CBI steps in and takes action after due diligence.
How do you get to know?
We come to know when the case comes to us from the banks.
You have spoken to Icai on that?
We don’t have to speak to Icai, individual banks have to do so.
Are there any other areas of improvement?
Yes, in recruitment and transfers.
No, banks are more professional in this area than other PSUs. Normally, one would assume that recruitment and transfers are administrative issues where the commission has no role to play. But we have seen several lacunae, including improper tabulation of marks, and marks written in pencil and altered. We have also found issues in transfers of employees, especially for “prized” posts within the organization.
Here, I would like to highlight the vital role a chief vigilance officer plays in a PSU. Coming from outside the organization, he needs to quickly understand the organization’s ways of working, appreciate the business the PSU is in, and have the skills of taking an objective view of all cases that he comes across.
Any other concerns the commission has?
We have observed that whenever someone is recommended for a promotion within the organization, or outside, there is a slew of complaints against him/her. Quite often, these complaints are not genuine and orchestrated by those who were unable to make it. This is, perhaps, one of the bigger challenges that the leadership in PSUs faces in building and maintaining the morale of the organization.
What kind of leadership do you feel PSUs need?
Transformational leadership and not transactional leadership.