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You have recently been promoted as a Branch Manager in a Public Sector Bank. The bank is battling high NPAs and mounting losses. You have been assigned a very high target of loans by the higher management for the current quarter. Your career prospects also depend on your performance in critical times. Few days back you rejected a loan application for a huge sum based on detailed analysis. Today you got a call from the Regional Manager to approve the loan quickly. On your reluctance to approve, he hints that the loan is sought by a person well connected in the finance ministry and that a refusal will have consequences for everyone in the approval chain. You are now in a tough spot. Based on the given information, answer the following questions: (a) Bring out the ethical issues in the case above. (b) What are the consequences of agreeing to the demands of the senior in the given case. Assess which of them are meritorious and which are not. (c) Suggest institutional reforms that can result in non-punishment of honest feedback. 20

(a) Ethical issues in the case are:

• Integrity of the institution i.e. the Bank- The decisions in any setup have to be taken at the level they are authorised to be taken. Once a decision has been reached after due-diligence, it must not be interfered with. This undermines the whole process and compromises the integrity of the organisation.
• Deterioration of lending culture- With external influence determining technical decisions, it creates a slippery slope for lack of analytical culture and application of independent mind in such decisions.
• Weak accountability measures- That the senior can ask for a blatantly corrupt request from a

subordinate reflects weakness in accountability measures in the system.

• Crony capitalism and Public trust in government- If public money is given to a project which has high risk and low chance of returning, it will undermine trust of public in governance institutions.Violation of code of ethics of the organization: succumbing to pressure would add to the current problem of rising NPAs and losses.
• Abuse of Power by those in authority.
• Economic health of nation: As to approve loan is potentially damning for economy of the country already grappling with NPA crisis situation.

(b) Consequences of agreeing to the demands of my senior and their merits are:

• Quick approval of loan will please the regional manager as well as the well-connected person seeking the loan. Thus, it may advance my career growth. However, it will add to the existing problem of increasing NPAs and mounting loans. It may also set a work culture precedent wherein a well-connected individual can bypass official procedures.
• Additionally, approval may help me meet the high target of loans. However, in the long-term it may seriously harm my professional career, as the loan would have been disbursed without an adequate risk assessment.
• It is also not a practical step as an external financial audit can jeopardize the credibility of the entire command chain.

Thus, the step to take in this scenario will be to objectively assess the risks associated with loan disbursal and give the report to the Regional Manager and other senior officials, who can then take a well-informed decision. This is a meritorious step as it will ensure that the organizational hierarchy is taken into confidence and canons of fiscal propriety are adequately followed.

(c) Institutional reforms that can result in non-punishment of honest feedback are:

• Adherence to transparency in decision-making. The process and parameters that go into taking a decision must be made public. This will create an external pressure on the organisation to stick to objective criteria and do not issue compromised orders which have no analytical basis.
• A culture of learning and leadership in the organisation. Nurturing leaders requires giving independence to take decisions. An organisation that recognises the values of learning and leadership takes feedback honestly rather than punishing for it.
• Effective internal grievance redressal mechanisms as well as robust internal vigilance system.
• Formulation and implementation of robust laws and code of ethics to protect honest officers and whistle-blowers.
• Governance reforms in Banks to ensure autonomy so that they don’t succumb to unscrupulous demands and punish honest feedbacks.