Loading...

⚠ ✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 Filters / Advanced Search ❯
TEXT

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ---- ❯
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ---- ❯
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ---- ❯
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
☰   Show Results ❯
    DRI seizes over seven kg amphetamine and three kg cocaine as it intensifies crackdown on drug trafficking in country; three arrested
    DRI seizes 13 kg foreign-origin gold worth around Rs. 19.41 crore and dismantles a gold smuggling syndicate in Gujarat; three arrested
    Department of Commerce Organises “Leveraging FTAs” Outreach Programme in Jaipur to Strengthen Export Opportunities
    Central Bureau of Narcotics (CBN) organises five drug awareness programmes for MP youth Mission Yuva Raksha
    DRI seizes massive 137 kg consignment of crystal meth; busts coastal drug trafficking network; 4 arrested in Tamil Nadu
    Optimization of Statutory Branch Auditors (SBAs) Costs and Acceleration of Centralized Audit Frameworks
    Clarification on Legislative Developments concerning Government’s shareholding in IDBI
    Introduction of e-Invoicing Facility for Recipient Generated Self Invoices under Reverse Charge Mechanism for Domestic Supplies from Unregistered Pers...
    DFS Organises Workshop on Reservation Policy for Public Sector Banks, Public Sector Insurance Companies and Public Financial Institutions
    APEDA Facilitates Export of 1.755 MT of Organic Palmyra Jaggery Powder from Tamil Nadu to Bulgaria
    Union Commerce and Industry Minister Shri Piyush Goyal Launches National Strategic Trade Command Centre at Vanijya Bhawan
    Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman participates in the 114th meeting of the Development Committee Plenary of the W...
    Customs officers detect 148.67 kg hydroponic weed from Bangkok at air cargo complex at IGI Airport
    DRI seizes around 6.2 kg foreign-origin gold; busts sophisticated gold smuggling modus operandi through unaccompanied baggage; three arrested
    Central Bureau of Narcotics (CBN) U.P. Unit holds public hearing to address grievances of opium cultivators
    Directorate of Revenue Intelligence (DRI) and Central Bureau of Narcotics (CBN) destroy 2.87 Hectares (7.08 Acres) of illicit cannabis (ganja) cultiva...
    The cumulative exports (merchandise & services) during April-September 2026-27 are estimated at US$ 476.20 Billion, as compared to US$ 418.31 Billion ...
    Union Minister of Commerce and Industry Shri Piyush Goyal Calls on Youth to Drive India’s AI Journey
    CCI approves acquisition of majority stake in Tribhovandas Bhimji Zaveri Limited by GRT Jewellers (India) Private Limited
    CCI approves the acquisition of certain shareholding in Kids Clinic India by NuageLux BidCo S.à r.l
❮
❯
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
October 19, 2026
Show AI Summary
Narcotics trafficking enforcement led to airport and road interceptions, baggage concealment detection, seizures, and arrests under the NDPS framework.
Narcotics trafficking enforcement under the Narcotic Drugs and Psychotropic Substances Act, 1985, involved intelligence-led interceptions at Bengaluru and Delhi airports and near Nagpur. Passenger baggage and a backpack were examined, leading to the seizure of amphetamine and cocaine and the arrest of three passengers. The recoveries included amphetamine concealed in baggage, a ladies' suit and a backpack lining, and cocaine contained in transparent packets within baggage.
October 19, 2026
Show AI Summary
Gold smuggling syndicate enforcement traces concealed imports through airport handlers, illicit melting, and jewellery-market disposal under customs law.
Directorate of Revenue Intelligence enforcement action identified an organised gold-smuggling syndicate importing foreign-origin gold through Ahmedabad and Surat airports, followed by handover to handlers, intermediary routing, illegal melting, and cash-based supply through an Ahmedabad jewellery outlet. Further searches recovered undocumented foreign-origin gold bars and records concerning smuggled gold linked to a Dubai-based financier. The investigation identified interconnected roles across the movement, processing, and disposal of smuggled gold; three persons were arrested under the Customs Act, 1962.
October 19, 2026
Show AI Summary
Free trade agreement utilisation requires origin compliance, product standards, and documentation to secure preferential export market access.
Effective FTA utilisation requires businesses to identify eligible products and markets, assess tariff preferences and rules of origin, and meet applicable quality, certification, documentation and importing-country requirements. Preferential access under agreements with the UAE, Australia, EFTA countries and the United Kingdom remains subject to each agreement's provisions and implementation status. Tariff preferences may improve price competitiveness and facilitate participation in international supply chains where product- and partner-specific conditions are satisfied.
October 19, 2026
Show AI Summary
Drug prevention awareness initiatives engage students through health education, interactive activities and pledges supporting a drug-free society.
Mission Yuva Raksha advances preventive drug awareness and demand-reduction efforts among students through programmes at educational institutions in Madhya Pradesh. Sessions addressed the harmful effects of substance abuse on physical and mental health, education, family life and careers, supported by interactive learning activities. Participants were encouraged to avoid drugs, adopt healthy lifestyles, take pledges and support awareness initiatives in their schools, families and communities. Preventive education and youth engagement complement enforcement-oriented work through informed choices and community-based resistance to substance abuse.
October 19, 2026
Show AI Summary
Coastal narcotics trafficking enforcement addresses suspected maritime methamphetamine smuggling through seizure, asset recovery, and arrests under drug-control law.
Intelligence-led narcotics enforcement addressed suspected coastal storage and maritime transfer of methamphetamine to Sri Lanka. Searches recovered crystal methamphetamine concealed in foil packets within duffel bags, which was seized under the Narcotic Drugs and Psychotropic Substances Act, 1985. Searches also recovered suspected drug-sale proceeds and vehicles allegedly used in transportation. Persons allegedly involved in organising coastal export, transport, storage and logistics were arrested and remanded to judicial custody.
October 17, 2026
Show AI Summary
Centralised audit framework targets lower physical branch audit coverage while preserving regulatory oversight and maintaining remuneration.
For FY 2026-27, audit remuneration is to remain at existing levels. Member banks are advised to accelerate a centralised audit framework to improve cost efficiency while retaining comprehensive risk oversight. Physical statutory branch audit coverage should be reduced to cover 50% of total business, apart from centralised treasury audits. Audit coverage must align with SEBI listing and disclosure requirements and RBI guidelines, supported by a Board-approved policy for the centralised audit roadmap.
October 17, 2026
Show AI Summary
Promissory estoppel cannot prevent Government shareholding dilution where enacted legislation imposes no restriction on strategic disinvestment.
Government shareholding in IDBI may be reduced or divested because the IDBI (Repeal) Act, 2003 contains no restriction on dilution of the Government's stake. A proposed amendment to limit dilution was rejected and not incorporated into the enacted law. Parliamentary statements cannot override statutory text, and promissory estoppel cannot be invoked on the basis of legislative debate statements to prevent dilution of Government shareholding. Successive Union Budget speeches also reflected a policy of transformation and strategic disinvestment of IDBI Bank.
October 16, 2026
Show AI Summary
Recipient-generated e-invoicing under reverse charge enables eligible taxpayers to obtain IRNs for domestic unregistered supplies and imported services.
Eligible active registered recipients meeting the applicable aggregate annual turnover threshold may report recipient-generated self-invoices for specified reverse-charge domestic supplies from unregistered persons and imports of services. RCMDOM and RCMIMP must be selected as the relevant e-invoice supply types when reporting through an authorised Invoice Registration Portal. Submission and validation of prescribed invoice particulars would generate an Invoice Reference Number, subject to applicable GST provisions, notifications and e-invoice specifications.
October 16, 2026
Show AI Summary
Reservation Policy Implementation in public financial institutions was examined through capacity building, practical deliberations, and measures for consistent application.
Implementation of the Government of India's Reservation Policy across public sector banks, public sector insurance companies, sectoral regulators and public financial institutions was addressed through capacity building to support uniform and effective application. Deliberations considered practical implementation issues, operational challenges and actionable measures for consistent policy application, alongside related welfare measures and interactive discussion of implementation questions.
October 16, 2026
Show AI Summary
Organic agricultural export certification supports overseas market access for Palmyra Jaggery Powder through export-oriented producer linkages.
APEDA facilitated the maiden sea export of NPOP- and EU-certified organic Palmyra Jaggery Powder from Tamil Nadu to Bulgaria. The initiative seeks to diversify India's organic export basket, create market linkages for traditional Palmyra-based products, and improve producer access through export-oriented value chains. It covers organic cultivation and reports improved price realisation for participating farmers and the manufacturer compared with the domestic market. APEDA supports certified organic and value-added agricultural exports through market development, quality compliance, and overseas buyer linkages.
October 16, 2026
Show AI Summary
Data-driven trade governance enables integrated monitoring, application analysis and evidence-based policy inputs through the National Strategic Trade Command Centre.
The National Strategic Trade Command Centre provides an integrated analytics and visualisation platform consolidating trade data to monitor trade indicators, scheme performance, application pendency, processing timelines, regional trends and compliance-related parameters. It enables analysis across national trade performance, Regional Authorities, schemes, products, destination markets and individual applications, subject to role-based access permissions. Initial dashboards cover key trade-facilitation and regulatory processes, including SCOMET, export promotion schemes, certificates of origin, importer-exporter registration and restricted imports and exports.
October 16, 2026
Show AI Summary
Private capital mobilisation should use competitive financing, guarantees and risk mitigation to expand productive employment and productivity.
Private capital mobilisation is treated as essential to employment generation and productivity growth. Private enterprises, MSMEs and startups should remain central to job creation, with financing assessed by employment and productivity outcomes rather than volume. Guarantees, risk-mitigation instruments, local-currency financing and lower transaction costs are identified as means to expand affordable and predictable access to capital. Methodologies underlying governance indicators should be transparent, objective, evidence-based and responsive to diverse development experiences.
October 16, 2026
Show AI Summary
Narcotics smuggling through misdeclared air cargo triggered seizure, arrest, and ongoing investigation into concealed hydroponic weed imports.
A Bangkok-origin air-cargo consignment declared as PU Tubes was examined on suspicion of mis-declaration. Plastic spools were found to contain concealed cavities holding polythene-wrapped packets of compacted green substance, preliminarily identified as suspected ganja/marijuana and described as hydroponic weed. The concealed substance, packaging and concealment material were seized under the NDPS Act, 1985. One person was arrested, and follow-up searches produced leads for continuing investigation.
October 16, 2026
Show AI Summary
Unaccompanied baggage gold smuggling: concealed hardware and insider coordination triggered interception, seizure, and arrests under customs law.
Foreign-origin gold smuggling through the unaccompanied baggage channel involved concealment of gold within hardware items and coordinated retrieval through warehouse personnel and intermediaries. Intelligence-led interception resulted in recovery and seizure of foreign-origin gold concealed in a floor spring, metal locks, a grease gun and a door closer. The arrangement used a trolley secured by a pre-decided number-lock combination, with a warehouse staff member, mediator and receiver allegedly involved in delivery of the concealed gold.
October 16, 2026
Show AI Summary
Opium cultivation licensing grievance redressal advances through public hearings, administrative remedies, policy recording, and a planned cultivator helpline.
Opium cultivation licensing grievances were addressed through a public hearing where cultivators raised irrigation, climatic, single-plot licensing, and village-wise allocation concerns. Participants were informed of available legal provisions and administrative remedies. Requests for more licences and larger cultivation plots were considered, with policy matters recorded. A helpline is intended to assist cultivators during the 2026-27 licensing operation.
October 16, 2026
Show AI Summary
Illicit cannabis cultivation: crop destruction followed legal formalities, while investigation continues in a remote wildlife sanctuary.
Illicit cannabis cultivation was located by a joint DRI and CBN team across five stretches of remote, densely forested wildlife-sanctuary land near village Jamniapani, Shirpur, District Dhule, Maharashtra. The cultivation covered 2.87 hectares. Following requisite legal formalities, the cannabis crop was destroyed using a rotavator in the presence of Police and Forest Department officials. Investigation remains in progress.
October 15, 2026
Show AI Summary
Merchandise and services trade estimates show export growth, import expansion, and a wider combined trade deficit over the reporting period.
Combined trade estimates for April-September 2026-27 show exports of US$ 476.20 billion and imports of US$ 551.13 billion, resulting in a trade deficit of US$ 74.93 billion. Merchandise exports rose to US$ 259.89 billion, while merchandise imports reached US$ 437.53 billion. Estimated services exports were US$ 216.31 billion and services imports were US$ 113.60 billion, producing a services trade surplus of US$ 102.71 billion. September services figures are estimates, and specified earlier-period data were revised using quarterly balance-of-payments data.
October 15, 2026
Show AI Summary
Emerging technology skills and resilient supply chains are positioned as foundations for investment competitiveness and inclusive economic growth.
Ministerial policy priorities for India's trade, investment and technology agenda emphasise artificial intelligence, cybersecurity, technology adoption, manufacturing investment and lifelong skill development. Investment competitiveness is linked to political stability, resilient supply chains, and fair and transparent trading practices. The first tranche of a bilateral trade agreement with the United States has been finalised, while final contours and legal drafting continue before operationalisation.
October 14, 2026
Show AI Summary
Majority stake acquisition in the jewellery sector receives competition clearance for GRT Jewellers' purchase of Tribhovandas Bhimji Zaveri.
Competition Commission of India approved GRT Jewellers (India) Private Limited's proposed acquisition of a majority stake in Tribhovandas Bhimji Zaveri Limited. The transaction concerns entities operating in the Indian gems and jewellery market, including a private limited acquirer and a publicly listed target engaged in manufacturing and sale of gems and jewellery.
October 14, 2026
Show AI Summary
Minority shareholding acquisition in mother and baby healthcare receives competition clearance for a private equity-backed investment.
Competition Commission of India clearance authorises NuageLux BidCo S.a r.l. to acquire approximately 23% of the fully diluted shareholding in Kids Clinic India Ltd. The transaction constitutes an acquisition of a minority equity interest in a healthcare provider operating under the Cloudnine brand. NuageLux BidCo is a Luxembourg-incorporated private limited special purpose vehicle, ultimately controlled by Permira Holdings Ltd.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Preventive Vigilance – The Key Tool of Good Governance at Public Sector Institutions (Urjit R. Patel, Governor, Reserve Bank of India - September 20, 2018 - at the Central Vigilance Commission, New Delhi)

September 21, 2018

Contents
Summary
Note

Note

-

Bookmark

Print

Print

 Preventive Vigilance – The Key Tool of Good Governance at Public Sector Institutions 1  2

Urjit R. Patel, RBI

Speech at the Central Vigilance Commission, New Delhi, 20th September 2018

“He is most free from danger, who even when safe, is on his guard.”

- Publilius Syrus (1st Century B.C.)

It is an accepted norm of organising human societies that with the right to liberty comes good governance, the latter being designed around laws (formal governance) or norms (informal governance) restricting excessive exertions of the right to liberty: Where individual actions are deemed to create adverse spillovers (“negative externalities”) on the rest of the society, laws or norms – backed by an enforcement machinery – draw a line as to what is acceptable human behaviour. Governance could be for the society as a whole or an individual firm or entity or a group of entities (e.g., the public sector). An important term we all come across in our functioning, especially in the public sector, is Vigilance, which is the essence of what all of you are attempting to achieve at the Central Vigilance Commission, established in 1964 by the Government of India, to address corruption in the government sector.

Vigilance is defined in dictionaries as “action or state of keeping careful watch for possible danger or difficulties.” It takes several forms, which are often classified as:

(1) Preventive vigilance, which is aimed at reducing the occurrence of a lapse (violation of a law, a norm, or, broadly speaking, a governance requirement);

(2) Detective vigilance, which is aimed at identifying and verifying the occurrence of a lapse; and, finally,

(3) Punitive vigilance, which is aimed at deterring the occurrence of a lapse.

The first part of what follows will provide a conceptual framework, based on the economic theory of incentives, which helps understand these various aspects of vigilance, how they interact with each other, and why preventive vigilance often takes centre stage in the government or public sector institutions as an essential tool of good governance.

Gary Becker’s “Crime and Punishment”

The modern economic theory of corruption and how to prevent it emanates largely from Gary Becker’s insightful and seminal pieces on Crime and Punishment during 1968-1974. Gary Becker, a young economist at the University of Chicago, took the theory away from moral and ethical basis to one based on optimal human behaviour in response to the presented economic incentives. He examined his own behaviour with regard to undertaking parking violations when rushing to work, which involved trading off the expected cost of illegal parking in a convenient spot, which he roughly calculated as the likelihood of getting a parking ticket violation multiplied by the parking fine (assuming non-payment of the fine would be too costly not to pay up) against the benefit in the form of convenience and reaching his class in time. Often, this calculation prompted him to opt for the parking violation, as legal parking in an inconveniently located garage did not seem economically attractive!

Becker extrapolated from his own daily behaviour to an important economic insight. [As an aside, “economics” derives from the Greek word “oikonomika” (οἰκονομία), which means “household management” and was the name of a treatise by Aristotle.] The insight was that criminals in society do the same calculation of the probability of getting caught times the potential punishment while determining whether to choose a criminal lifestyle and what crimes to engage in; conversely, if criminals responded in this manner to economic incentives rather than (only) because they had character flaws or mental illnesses, then how should laws and their enforcement be organised taking into account the costs of enforcement, and might it be excessively costly and economically undesirable in practice to reduce crime rates to zero?

Building on this fundamental insight that governance lapses may be rational choices rather than mental illnesses or character flaws in transgressors, we could consider a simple but instructive conceptual framework that may help understand how preventive, detective and punitive vigilance work with each other and should be designed given the rational best response  of citizens or employees, who given the incentives, will all be treated uniformly as potential offenders.

A conceptual framework

The framework is illustrated in the following schematic of how vigilance and employee actions are sequenced in a typical institutional setting. Let us walk through it step by step.

 

The employee is in control of an action whose outcome can be “good” or “bad”. If the outcome is good, the firm’s cash flow or value is higher at H as compared to L, when the outcome is bad (L < H). The employee’s “effort” is denoted as p and determines in part the likelihood that the outcome would be good (the rest being purely due to chance or background noise). The employee bears an exertion cost from undertaking this effort (so all else equal, prefers shirking), or alternatively has some private gains (side benefits from a bad-outcome for the institution). This cost creates a potential wedge between what is privately optimal for the employee and what is optimal for the institution.  

Recognising this wedge, the institution (or its regulator) puts in place preventive vigilance (v), detective vigilance (q) and punitive vigilance (d):

Preventive vigilance (v) reduces the likelihood of employee control over the action in the first place, i.e., it puts in place safeguards such that employee lapses are less likely to occur.

Detective vigilance comes into play before the outcome has actually been realised (this is shown in the schematic as the oval box around the outcomes H and L). Its precision is denoted by q. The higher the q is, more precise is detective vigilance in identifying the good (bad) outcome indeed as the good (bad) outcome; conversely, (1-q) captures the error rate of detective vigilance whereby it detects the good (bad) outcome as bad (good). [There are alternative ways of modeling detective vigilance. For instance, it may seek not just to identify when the outcome would have turned out to be low, but also aim to “nip it in the bud” so as to reverse it to a good outcome. In other words, detective vigilance in some cases may catch lapses and correct them. In yet another variant, detective vigilance could also be modeled as identifying only the low outcome possibility with some likelihood but not being able to reverse the outcome. Depending on the setting, one formulation may be more suitable than the others.]

Punitive vigilance reduces the employee reward in the good-outcome scenario, denoted as R, to (1-d).R, in the bad-outcome scenario, where d > 0. The punishment d.R serves an incentive for the employee to invest in increasing the good outcome likelihood. Typically, in such setups, the value of R < H is pinned down based on the employee contract being attractive enough relative to reservation opportunities such as alternative job offers for employees or payoffs from remaining unemployed.

An example can help visualise the structure more concretely. Consider for instance procurement at a government institution. Efficient procurement would lead to a higher value for the institution by ensuring quality is met at the cheapest cost. In order to reduce employee discretion in the procurement process which could potentially lead to compromised choices, preventive vigilance is put in place in terms of designing the procurement process (“L1”), requiring procurement be undertaken only through, e.g., an electronic tendering process, etc. Detective vigilance is also put in place in the form of a concurrent/internal audit within each department of the institution that tries to ensure lapses are caught and fixed before they lead to the final procurement decision. Finally, in case of a violation of procurement guidelines is found  ex post in spite of the other vigilance mechanisms, the central vigilance office of the institution undertakes a disciplinary action against the involved employee.

Technical assumptions

Let us then come back to the conceptual framework for vigilance. To derive the equilibrium solution in the setup and understand its properties, the following intuitive assumptions are made:

  • Employee effort (p) leads to exertion cost that is progressively costly (increasing and sufficiently convex) so as to rule out the corner solution that perfect governance can be implemented in practice.
  • Similarly, investing in preventive vigilance (v) and detective vigilance (q) become prohibitively expensive beyond a point, i.e., the costs of increasing v and q are increasing and convex enough so as to rule out the corner solution of perfect governance.
  • In similar vein, there are limits on punishment levels: one being that there is limited liability so that employee’s pecuniary reward even in the bad-outcome scenario can only be positive (d < 1) even if it is lower than the reward in case of the good outcome; further, there may be lower bounds on the bad-outcome reward as the institution may be constrained by (un-modeled) side-effects such as the costs of dealing with grievance redressal and legal recourse being undertaken by the employee in case the punishment for low-outcome scenario being realised is too severe.

Key “insights”

Along the lines of Gary Becker’s seminal analysis, this simple framework for understanding vigilance leads to the following insights:

1. Detective and punitive vigilance are strategic complements: The greater the punishment, the more useful it is to detect. Conversely, having a high penalty is ineffective (given concomitant side-effects or costs) when the quality of detection is poor.

2. Preventive and detective (as well as punitive) vigilance are strategic substitutes: The lower the detection and punishment, the more useful it is to prevent lapses at the outset since detective and punitive vigilance do not provide adequate incentives. This is important and will be discussed further in the context of public sector institutions.

3. Preventive vigilance dominates other forms for dealing with lapses outside of control: The above schematic potentially allows the analysis of how to tackle vigilance design with human effort (which is under one’s control) versus human error (which is outside one’s control). As an extreme case, suppose that there is no control under the employee to affect the outcomes (p is fixed). Then punishment achieves absolutely nothing in improving outcomes. In this case, preventive vigilance which effectively reduces the chance of a lapse in the first place dominates detective and punitive vigilance. Detective vigilance may nevertheless be effective in identifying lapses which occur due to pure chance and possibly for reversing the bad outcomes to good ones.

Dynamic considerations

Outside of the simple one-period or static model outlined above, there are important dynamic considerations that may be important in real-world design of vigilance processes.

One, it might be attractive for an institution to undertake punitive vigilance beyond what is desirable in a purely myopic sense for the purposes of setting a “precedent”; in other words, so as to deter recurrence and build a reputation or create a credible culture for zero or low tolerance for repetitive lapses.

Two, in practice poor governance outcomes may not simply be due to optimal incentive-based behaviour, but also due to the presence of habitual offenders (an employee “type”, so to speak). In such a setting, there may be learning over time on a given employee’s type that can help separate type from pure background noise; when this is the case, some weeding out may be necessary based on initial detection phase which only after a few periods leads to a punitive vigilance outcome as it becomes certain that employee type is above a threshold in terms of repetitive lapses that cannot be attributed over time to just chance.

Let us now turn to why these observations imply an essential role for preventive vigilance in good governance, especially in public sector institutions.

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.

In turn, given the first insight (Key insight 1) from the model, detective vigilance too is rendered somewhat ineffective. Put simply, 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 incidence of lapses, even though it might help in some cases arrest the slide and contain with remedial measures.

As a result, given the second insight (Key insight 2) from the model, 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.

These observations have substantive relevance for understanding how one might tighten governance in practice, for instance, in lending outcomes (underwriting or screening, monitoring and recovering post default) at public sector banks, a setting that is beset with many of the features highlighted above. That is for another day. For now, let us turn to how vigilance is organised at the Reserve Bank of India, the central role that preventive vigilance takes at the Bank, and the measures that we have adopted to date in this regard.  

Vigilance functions at the Reserve Bank of India (RBI)

The overall responsibility for vigilance work at the Reserve Bank vests with the Central Vigilance Cell (C. V. Cell or just Cell), which exercises its jurisdiction over all employees of the Bank and co-ordinates the activities of the 49 Branch Vigilance Units. The Cell maintains liaison with the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI). The focus of the Cell is to have a comprehensive preventive vigilance setup supported by an audit framework so that vigilance issues are minimised and to sensitise our employees to various aspects of vigilance administration.

The guidelines on vigilance, issued by the CVC, are aimed at greater transparency, promoting a culture of honesty and probity in public life, and improving the overall vigilance administration in the organisations within its purview. The Central Vigilance Cell at the Reserve Bank, led by the CVO, follows the guidelines issued by the CVC (the Commission) from time to time. The Chief Vigilance Officers (CVOs), who are the extended arms of the Commission in their respective organisations, decide upon the possibility of a vigilance angle in individual cases in an organisation. Not only the financial propriety of transactions, but certain non-financial aspects arising inter alia from conflicts of interest, nepotism and considerations of post-retirement employment as a quid pro quo, are also required to be examined from a vigilance angle.

As mentioned earlier, the Bank’s vigilance administration focuses on preventive vigilance functions by inculcating a sense of honesty and integrity among its employees and ensuring that sound internal systems and controls are laid down, which act as a defense against intended mala fide activity by any employee. This is borne out by the fact that the incidence of vigilance cases in the Bank has been negligible. Over the last four years, the percentage of vigilance cases against RBI employees’ vis-à-vis the total staff strength of the Bank stood on average at 0.004 per cent. Further, in terms of complaint cases received against RBI/RBI employees over this same period, the percentage that required punitive vigilance action stood on average at 0.081 per cent. We continue to endeavor to maintain high standards of integrity. Let me highlight some of the preventive measures taken by the Bank as a part of this endeavour.  

Preventive vigilance measures at the RBI

The RBI Staff Regulations 1948 constitute one of the earliest attempts at prescribing preventive vigilance measures. The Regulations contain various “Do’s and Don’ts” for the staff. A Code of Ethics was also framed subsequently in 2013 titled “Ethics at Work.” Preventive vigilance measures emanating from these Regulations and the Code are enforced partly at the individual level, and, partly at the organisational level.

At the individual level, instructions are in place requiring an officer to obtain prior permission for certain transactions (e.g., 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 (s)he 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 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, etc.

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 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.
  • In March 2017, the Cell organised a training programme at the College of Agricultural Banking (CAB), Pune, wherein the Chief Technical Examiner of the Commission addressed the officers of the Bank dealing with procurement activities and provided them with valuable tips on addressing vigilance issues that arise during the process of procurement.
  • Another training programme for the senior officers of the Bank was organised in September 2017 at the CBI Academy in Ghaziabad to sensitise officers on the investigative aspects of vigilance.
  • A workshop on ‘Principles of procurement and related case studies’ was recently conducted at Mumbai for the benefit of officers dealing with procurement. Further, a Video Conference was held to enhance awareness and to review the status of implementation of e-tendering.

An important feature of preventive vigilance at the Bank is internal governance, i.e., involvement of employees themselves for disciplining each other. For instance, as a step towards further strengthening preventive vigilance in the area of procurement, the Bank has introduced the concept of “Integrity Pact” (IP) for large value procurement (exceeding ₹ 5 crores) and the pact is overseen by an Independent External Monitor (IEM) appointed by the 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 Bank. The Cell has also put in place a whistle blower policy for the 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 our functioning and restricting ad-hoc exercise of powers, the Bank has taken additional measures such as:

  • Providing substantial disclosure on the Bank’s website regarding its functioning; the procedures followed in its decision-making; and the timeframe for granting approvals and permissions.
  • Departments that have 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.
  • 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; the details of the penalties are also disclosed on the Bank’s website.
  • All tenders that are floated or awarded by the Bank above a certain monetary limit are displayed on the website.

Conclusion

Let me conclude. Being a public sector institution, and as argued conceptually above, 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 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 Bank will continue in its endeavour to preserve the highest level of integrity at the Bank by sustaining and strengthening these preventive vigilance measures further. We look forward to the Commission’s support and guidance as we seek – in the ever-increasing complexity of the Bank’s environment – to strengthen its preventive vigilance framework, by simplifying rules and procedures as also by leveraging technology to ensure compliance. Thank you.

References

Becker, Gary S. (March-April 1968) “Crime and punishment: an economic approach”, Journal of Political Economy, Chicago Journals, 76(2), 169-217.

Becker, Gary S. (1974) Essays in the economics of crime and punishment. New York: National Bureau of Economic Research, Columbia University Press.

--------

1 Author’s note: The Lecture is in memory of Deena Khatkhate, who served in the RBI, 1955-1968.

2 I would like to thank Viral Acharya and Lily Vadera for their help in preparing this Lecture.

Topics

Acts Income Tax