Plain 'Whistle Blowing' or they mean Business?

CEOs of prominent private banks have offered immunity to the whistle blowers. This came after allegations levelled by Cobrapost.com that certain employees of private banks launder black money by adopting unfair practices. Chief executives at ICICI Bank and HDFC Bank have offered immunity to staff who exposes unfair practices and violation of guidelines by colleagues, even as the Reserve Bank of India (RBI) has dismissed money-laundering allegations made about these banks by a sting operation.

Providing immunity and protection to whistle-blowers could enhance employee trust drastically, and could contribute to creating strong engagement between them and their respective organizations. This could also foster a culture of good practices and fairness, both among internal and external stakeholders. However, despite the fact that the announcement by these CEOs appears very good on paper, the larger question remains that of execution. Would the whistleblower policy be implemented in letter and spirit or remain as a mere PR exercise.

My scepticism is not without reasons –

Hidden Target Effect: Most of the allegations against the employees of certain private banks in the Cobrapost ‘expose’ related to efforts by them to help their client’s convert black money to legal money using unfair means and also by-passing important banking rules and guidelines. But then could such practices have been the result of immense pressure of targets that these banks place on their employees? Perhaps many-a- times banks may know that such targets are unrealistic and not possible to achieve through ‘right and fair’ means, yet they may turn a  blind eye to their employee’s misdemeanours and maintain a ‘silence of convenience’.

This is what I call the hidden-target effect and if its in place then that would nullify any policy on immunity of whistleblowers, as in this case the bank is a ‘silent’ accomplice of their employees.

Reactive Defensive-Routine effect: Way back in April 2007, the apex central bank had announced a policy for the protection of whistleblowers. The Reserve Bank of India (RBI) had introduced a whistleblower policy for private and foreign banks that allowed customers, shareholders, NGOs and other members of the public to complain in confidence. The complainant could even be an employee. Then suddenly after 6 years why would some private banks announce a similar policy – why after 6 years and why again?

The announcement by the chief executives of these banks appears to more of a reactive defensive routine. Despite the fact that for now that the apex bank has dismissed any money-laundering charges against these banks, the sting has definitely created some bad publicity. Such an announcement could be to thwart the negative publicity.

History is replete with examples where whistleblowers have been subjected to harassment. In fact in the case of a prominent international bank a whistleblower was subjected to harassment and even fired from the bank. This happened despite the fact that the bank had a whistleblower policy.

Regulations effect: The other reality of our banking system is that it is highly regulated. The fact that black money is stashed away from Indian shores is of no gain to anyone. I am not advocating creation of black money but the fact remains that such money is in circulation. So what do you do about it? You can have a highly regulated environment and encourage the black money owners to stash it away from the Indian shores, but then it will remain out of bounds for everyone except the one who has stashed it away.

A recent report, submitted to the government in December, speculates the size of black economy at about 30% of India’s gross domestic product (GDP) or about Rs. 25 lakh crore. A study commissioned by the government last year on quantifying black money generated in the country has estimated that the illicit wealth is likely to exceed 10% of GDP or anywhere above Rs 10 lakh crore, given the size of the economy. Most of this black money is stashed offshore and it is impossible to believe that such enormous amount of black money could have been possible without a hidden & illicit nexus.

Is there any way that our government can bring back all this black money? Undoubtedly many will echo the very obvious answer – No.

Conclusion
Are these regulations responsible for such practices amongst private bank employees?
Are aggressive targets of these banks responsible?
Are banks conveniently quite on such practices, yet make PR noises?

I leave it your judgement.

However, a whistleblower policy may not be enough –
a)without finding out reasons for the alleged prevalence of wrong practices among private bank employees;
b) without real execution of such a policy; and,
c) without either fundamentally altering the organizations or altering regulative environment.