Preventive Vigilance – The Key Tool of Good Governance at PSUs
RBI Governor, Dr Urjit R. Patel, spoke at the Central Vigilance Commission, highlighting the importance of vigilance for the public sector institutions and especially underscored the key role that preventive vigilance plays in keeping the system robust and reliable.
The Governor emphasised the need of being vigilant and defined vigilance as “action or state of keeping careful watch for possible danger or difficulties.” It takes several forms, which are often classified as:
- Preventive vigilance, which is aimed at reducing the occurrence of a lapse (violation of a law, a norm, or, broadly speaking, a governance requirement);
- Detective vigilance, which is aimed at identifying and verifying the occurrence of a lapse; and finally,
- Punitive vigilance, which is aimed at deterring the occurrence of a lapse
He referred to the modern economic theory of corruption and how to prevent it that emanates largely from Gary Becker’s insightful and seminal pieces on Crime and Punishment during 1968- 1974. Along the lines of Gary Becker’s seminal analysis, he also gave key insights for understanding vigilance.
What vigilance is likely to work the best in a public sector institution?
Punitive vigilance is difficult in a public sector institution for several reasons. The rewards are low to start with, thereby limiting the possibility of downward revisions. Given this constraint, disciplinary actions that limit the chances of career progression are often the preferred punishment. However, this has the misfortune of demotivating employees beyond the point of their career when punitive vigilance action is undertaken. This could, in principle, be dealt with a “golden handshake”; however, the insurance that public sector jobs offer is often a key attractive feature of these jobs given the lack of significant upside financial rewards. While there are ways to fine-tune pecuniary incentives and career-based rewards for greater effectiveness even within these constraints, it is fair to conclude that their “bite” is not as strong as in the private sector.
Detection does not lead to punitive outcomes (except perhaps in extreme or egregious cases and over time) so that investment in detective vigilance does not guarantee the desired reduction in the incidence of lapses, even though it might help in some cases arrest the slide and contain with remedial measures.
In such a scenario, preventive vigilance takes center stage and becomes a key effective tool of governance in a public sector institution. When lapses can arise due to background noise outside of the employee control (which is often the case in public sector due to the complexity of the interaction with a multitude of other public sector entities), punitive vigilance becomes even less attractive due to further demotivation that it might induce; in turn, so does detective vigilance. In other words, while not taking away from the need to engage in some detective and punitive vigilance, preventive vigilance is conceptually likely to be the most effective governance mechanism at public sector institutions
Preventive vigilance measures at the RBI
At the individual level, instructions are in place requiring an officer to obtain prior permission for certain transactions (such as, acquisition of immovable property and taking a loan from a financial institution); reporting of certain transactions (acquisition of movable assets above a monetary limit and employment of family members in financial institutions); and upfront disclosure when the employee has a personal interest in any official transaction which she is dealing with.
At the organisational level, the preventive vigilance measures in place include identification of sensitive posts, surprise visits by senior officers to vigilance sensitive areas, incorporating vigilance related sessions in the Human Resource (HR) related training programmes at the Reserve Bank’s training establishments, sensitising new recruits on various aspects of vigilance and proper conduct, periodical rotation of staff, well laid down recruitment procedures and procurement policies, close monitoring through CCTV of sensitive areas in the cash department, institution of an effective grievance redressal machinery for the staff and persons who have official interaction with the Bank, and others.
As part of these preventive vigilance measures at the organisational level,
- The Central Vigilance Cell brought out a Compendium of instructions on tenders and other vigilance matters for the benefit of the staff. The Premises Department of the Reserve Bank also has a manual for all procurement. The Cell, during the course of the Vigilance Awareness Week 2017, launched a separate site on our intranet site (called the “EKP”) where all vigilance related information is available in one place.
- Several training programs and workshops have been organised for the officers of the Reserve Bank providing them with valuable tips on addressing vigilance issues that arise during the process of procurement, on the investigative aspects of vigilance, to enhance awareness and to review the status of implementation of e-tendering
An important feature of preventive vigilance at the Reserve Bank is internal governance, that is, the involvement of employees themselves for disciplining each other. For instance, as a step towards further strengthening preventive vigilance in the area of procurement, the Reserve Bank has introduced the concept of “Integrity Pact” (IP) for large value procurement (exceeding ₹5 crore) and the pact is overseen by an Independent External Monitor (IEM) appointed by the Reserve Bank with the concurrence of the Commission. The Integrity Pact (IP) is an agreement between the prospective bidder (vendor) and the buyer not to resort to any corrupt practices in any stage of the contract. The Pact between the vendor and the buyer involves their primarily agreeing to refrain from bribery, collusion, etc., during the entire process of the contract. The Independent External Monitor independently reviews whether and to what extent parties to the Pact have complied with their obligations under the Pact.
In case of a suspicion, the IEMs examine all complaints received for breach of Pact and furnish their views to the Chief Executive of the organisation or directly forward the findings to the CVO and the Commission. Several other measures are also aimed at instilling strong internal governance. To ease lodging of vigilance related complaints, the name, address, telephone/fax number and e-mail address of the CVO is displayed on the website of the Reserve Bank. The Cell has also put in place a whistle-blower policy for the Reserve Bank so that instances of corruption can be exposed by an employee without fear of retribution, or without the complainant’s identity being disclosed.
Finally, with a view to promoting transparency in the functioning and restricting the ad-hoc exercise of powers, the Reserve Bank has taken additional measures, such as:
- Providing substantial disclosure on the Reserve Bank’s website regarding its functioning; the procedures followed in its decision-making; and the timeframe for granting approvals and permissions.
- Departments that have a public interface, are required to display a Citizen’s Charter, which indicates time schedules for diverse activities; for deficiency in service, a publicised grievance redressal system is in place.
- A requirement that whenever any monetary penalty is imposed on a regulated entity, such decisions are taken by a Committee unconnected with the underlying operation, and not by any individual officer, after following a due process.
- All tenders that are floated or awarded by the Bank above a certain monetary limit are displayed on the website.
Being a public sector institution, the Reserve Bank of India considers preventive vigilance measures as the lynchpin of its efforts for good governance. The extant preventive vigilance measures at the Reserve Bank have helped its employees adhere to its Regulations and the Code, with any deviations being carefully detected, scrutinised and remedied. The Central Vigilance Cell at the Reserve Bank will continue in its endeavour to preserve the highest level of integrity at the Reserve Bank by sustaining and strengthening these preventive vigilance measures further. The Reserve Bank looks forward to the Commission’s support and guidance as we seek – in the ever-increasing complexity of the Reserve Bank’s environment – to strengthen its preventive vigilance framework, by simplifying rules and procedures as also by leveraging technology to ensure compliance.
RBI Governor Urjit Patel said Thursday that preventive vigilance can be used as an effective tool of governance in public sector institutions, arguing that punitive vigilance may not yield the desired result. Patel was speaking at a conference at the Central Vigilance Commission (CVC) here on ‘Preventive Vigilance – The Key Tool of Good Governance at Public Sector Institutions’. Patel said ‘preventive vigilance is aimed at reducing the occurrence of a lapse (violation of a law, a norm, or, broadly speaking, a governance requirement), while punitive vigilance seeks to deterring the occurrence of a lapse. He said that punitive vigilance is difficult in a public sector institution for several reasons, adding the rewards are low to start with, thereby limiting the possibility of downward revisions.