The committee consists of representatives from the Securities and Exchange Board of India, State Bank of India, Industrial Development Bank of India and the Indian Banks' Association. The committee will finalise the report by the last week of October.

The draft chapter will then be given the final shape by another panel consisting of RBI deputy governor Jagdish Capoor, SBI chairman MS Verma, IDBI chief GP Gupta and SEBI chairman DR Mehta.

The CVC has said that new chapter on banking sector is likely to be incorporated by December 1. The CVC will incorporate the new chapter after receiving inputs from the banks and the Central Bureau of Investigation (CBI).

"It has been a victory for bankers after the CVC decided that a new chapter will be incorporated in the vigilance manual. It has been a long standing demand of the industry," MN Dandekar, secretary, IBA said. The premier bankers' body has already prepared its recommendations.

The new chapter will seek to bring to an end to the era of witch-hunting in the banking sector which has had an adverse effect on credit decisions by bankers.

Sources also pointed that the bank frauds office-- chaired by the former RBI deputy governor SS Tarapore--might be dismantled. At present, this cell vets all cases of frauds--involving senior bank executives--before referring to the CBI for investigation.

The CVC had agreed that banking was a risky business and, therefore, needed a different treatment from others, sources said adding a need was felt for incorporating a special sector-specific chapter dealing exclusively with banking as it involves a certain element of risk.

The vigilance manual--now being used--has been designed mainly for use by government departments and public sector undertakings and the concept of loss arising from a credit decision taken in good faith is seen as akin to the concept of loss to the government.