Page 45 - Banking Finance October 2023

ARTICLE

customer relationship, service delivery, credit management, Why codes of Ethics fail ?
regulatory compliance etc. Ethics, corporate governance and Organisations where a code of ethics might grossly and
responsible financing are interlinked.
significantly fail to bring in any difference to the ethical
working of the employees could be when :
The employees must be sensitized for the
1. Language used in code of ethics is very complex and
following aspects: ambiguous
a) Conflicts of interest
2. Code of ethics commits for something that is very
b) Confidential information difficult for a bank to ensure
c) Fair dealing 3. Top management does not find time to periodically
d) Policy on social media meet and take stock of the collated and reported
e) Employee relations - for the fresher as well as for the information of employees violating code of ethics
experienced 4. Management either remains biased or is perceived to
f) Sharing Bank's own experience in ethical compromises be biased in dealing similar cases of code violation and
awarding different penalties
Commercial banks in India may also take up some additional
measures (mentioned below) to better strengthen the Way forward
ethical environment in their banks In the Indian and global contexts, there are adequate
i. An officer of established ethical conduct can be handed number of Ethical Codes. Corporate Governance Codes,
over the responsibility to look after the ethics (besides Rules from the regulators, Laws, directions from select
compliance) in the banks . He / She may publicize the enforcement agencies and government authorities in
ethical aspects to all employees from time to time on context of the acceptable behaviour at work. There is also
bank's intranet. substantial literature that is available both in the form of
books, research reports etc. The fact of the matter is that
ii. Digitisation and online availability of credit appraisals
more than what regulator prescribes the ethical behaviour has not yet been imbibed by the entire
fraternity of the financial sector. The reasons could be many
iii. Felicitating employee of the month for highest ethical such as materialistic behavior, greed, negligence, pressure
conduct from the unscrupulous borrowers, lack of involvement in
iv. Making all employees to work towards maximization of work or inadequate diligence and above all the lack of fear
profits for the bank without compromising on ethical that the career will be damaged, if the employee is caught
principles. and faces punishment.
v. Acting strictly in accordance with the banking principles Some ways in which employees may be persuaded to remain
and not individual discretion ethical in their career and life is through efforts by top
vi. Not succumbing to pressure from top when there is no managements in the form of training the personnel at the
justification stage of induction and orienting them towards ethical
conduct and some motivational sessions by the outside
vii. Helping the loan applicants who are financially most
deserving, even if it requires spending extra time and experts who themselves have been known for their
efforts impeccable track records throughout their career. Besides,
there can be some reward and recognition system for those
viii. Incorporating ethical conduct as a parameter in annual who have remained ethical in their duties rather than
appraisals treating it as a job.

Four broad aspects can be identified to justify why banks Sources
need separate Code of Ethics for their employees. These are 1) Book on "Ethics in Banking' by IIBF
1. sensitizing their employees to their responsibilities 2) Book "Business Ethics" by C.S.V. Murthy

2. To display that banks value integrity 3) Rbi.org.in
3. To avoid innocent violations 4) Business standard.com
4. To deal with habitual violators 5) Internet

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