|CVC asks CBI to probe Rs 1,100 cr loan fraud|
Press Trust of India / New Delhi June 14, 2012, 15:35
The Central Vigilance Commission has asked the CBI to investigate a large scale fraud committed by a private firm by allegedly misusing Rs 1,100 crore loan taken from different nationalised banks and wrongly claiming its end-use.
CVC officials said the firm was taking loans from various banks with the stipulations that it will be used by farmers of different states for growing and supplying castor seeds.
They said Indian Bank's Gotri Branch in Ahmedabad has sanctioned a short term loan of Rs 50 crore on December 31, 2007 to 11 commission agents under tie-up arrangements with the private limited firm.
"The loan were sanctioned to the commission agents for onward lending to farmers for procurement of castor seeds and its cultivation. However, several irregularities were reported in the loan accounts such as disposal of hypothecated stocks, fictitious commission agents, etc", the CVC said.
A study conducted by the bank brought out that the firm had played a fraud by availing the loans in the names of commission agents.
While examining the case, it was found that the said firm was given loans by various banks with the stipulation that end use of fund should be used by farmers for growing and supplying castor seeds to the firm, the Commission said.
"However the loan proceeds were not used for the envisaged purpose of onward financing to farmers and the proceeds were diverted.
"The total amount involved in the whole case is Rs 1,110 crore and a consortium partners of nine banks lead by State Bank of India (SBI) and various other banks as consortium had lent to the firm", it said. (MORE)
Fraudulent bank loans hit Rs 6,000 cr in 2011, CBI probe on
Vijay Ganeshan, NDTV, 06 Jun 2012 | 02:54 PM
Indian banks are headed for more trouble after the bank fraud cell at the Central Bureau of Investigation registered cases worth Rs 6000 crore in calendar year 2011, sources told NDTV Profit. The Mumbai division of the unit alone registered cases involving Rs 2,000 crore.
Sources said most of these loans could turn into non-performing assets (NPAs), or bad loans. The numbers will hurt the balance sheets of Indian banks, most of whom are already struggling with rising NPAs.
In fiscal 2012, Indian banks sought to restructure $12 billion (about Rs 65,000 crore), up 156 percent from a year earlier. In In April 2012, at least 18 cases, accounting for more than Rs7,300 crore were referred to the Reserve Bank of India’s corporate debt restructuring (CDR) cell.
All of these cases involve fraudulent loans taken out by companies that, in most cases, have no assets or businesses to back it up. The CBI has registered cases against the promoter of such companies and some bank officials could also be held, the sources said. In many of these cases, the banks failed to check and implement their Know Your Customer (KYC) norms that are meant to protect against such fraud.
Since January 2012, cases worth Rs 150 crore have already been registered by the CBI.
The deception has hit both state-owned and private sector banks, but 80 per cent of the loans involve public sector banks.
In wake of the large amount involved, the CBI is also planning to write to the Reserve Bank of India, asking it to direct banks to implement KYC norms more strictly.
Increasingly, banks are approaching to CBI cell to investigate suspected cases of bogus companies taking out loans and then defaulting.
However, it is not just customers that are defrauding banks – in some cases, the banks are doing it to themselves.
In a major scandal last year, the CBI found that four nationalised banks -- Bank of Maharashtra, Central Bank, Oriental Bank of Commerce and IDBI – had themselves opened about 10,000 fictitious accounts and transferred various loans worth Rs 1,500 crore into them.
The single largest instance was of a non-existent firm based in Gujarat – Biotor Industries – that was given loans of Rs 500 crore, allegedly in the names of farmers.
OBC & Central Bank of India had the maximum exposure of Rs 120 crore each, while IDBI had Rs 115 crore and Bank of Maharashtra, Rs 50 crore.
The CBI is investigating that case, and has also questioned senior management on how KYC norms were flouted on such a large scale.
CVC raises monetary limit for reporting fraud to CBI
The Central Vigilance Commission has increased the threshold to Rs. 3 crore from Rs 1 crore for fraud cases to be reported to CBI by public sector banks. As per the revised structure, fraud of minimum Rs 3 crore and up to Rs. 15 crore has to be reported to the CBI's Anti-Corruption Branch (in case staff involvement is prima facie evident) and Economic Offences Wing (if staff involvement is prima facie not evident) respectively.
Case of Rs. 15 crore and above should be given to CBI's Banking Securities (BS) and Fraud Cell, officials said.
The cases where the amount is less than Rs 3 crore should be reported to police, they said.
Earlier, cases of fraud involving Rs 1 crore to Rs. 7.5 crore were to be reported to the CBI's ACB and EOW and all cases involving over Rs. 7.5 crore were to be probed by BS and FC unit of the investigating agency. Cases of below Rs 1 crore fraud were to be referred to police.
"BS and FC is a specialised unit for bank fraud cases and should be allowed to concentrate only on investigations of high value bank fraud cases. CBI has emphasised the need for revising the present monetary limit for cases to be referred to its various units," an official said.
A letter informing the changes in the monetary limits for referring financial fraud investigations to the CBI and state police has been sent to Reserve Bank of India, CBI and chief vigilance officers of all public sector banks for immediate compliance," he said.
RBI cancels licence of scam-tainted Madhavpura Mercantile Bank
June 08, 2012 03:42 PM
Over past, the Bank's reconstruction scheme did not make much progress mainly due to non-fulfillment of commitments for contribution to revival fund by UCBs and poor track record of recovery including from Ketan Parekh
New Delhi: The Reserve Bank of India has cancelled licence of security scam-tainted Madhavpura Mercantile Cooperative Bank following failure of efforts to revive it, reports PTI.http://www.moneylife.in/article/rbi-cancels-licence-of-scam-tainted-madhavpura-mercantile-bank/26199.html
"All efforts to revive it in close consultation with the Government of India had failed and the depositors were being inconvenienced by continued uncertainty," RBI said in its order cancelling the licence of the Ahmedabad-based cooperative bank.
The cooperative bank, was granted a licence by RBI in 1994, resorted to indiscriminate lending, particularly to companies linked to stock Ketan Parekh, in gross violation of lending norms during 1999-2000.
In March 2001, there was a sudden run on the cooperative bank following rumours of its large exposure to Ketan Parekh, a leading stock broker at Mumbai, who suffered huge losses in his share dealings, it said.
The cooperative bank was also holding substantial amount Rs800 crore of inter-bank deposits from a large number of Urban Cooperative Banks in Gujarat and from other banks and this posed a systemic risk for cooperative banks in Gujarat, it said.
The restructuring scheme initiated in 2001 envisaged infusion of funds, retention of existing deposits, converting call money borrowings from banks/institutions into term deposits, DICGC meeting its obligation in full to the cooperative bank's eligible depositors, investment of fresh deposits in , management aspects etc.
"During the period of 10 years, the Reconstruction Scheme did not make much progress mainly due to non-fulfillment of commitments for contribution to Revival Fund by UCBs and poor track record of recovery including from Ketan Parekh. The scheme expired on August 23, 2011," it said.
As of March 2011, the bank's assessed net worth was negative Rs1,316.50 crore, gross NPAs was 99.99%of its total advances of Rs1,126.59 crore. The bank had accumulated losses at Rs1,357.41 crore. The deposits of the bank have been eroded fully at the end of March 2011.
In view of the precarious financial position of the cooperative bank, a show cause notice was issued by RBI on 16 March 2012 asking it as to why the licence granted to it to carry on should not be cancelled.
The cooperative bank in its reply dated 18th April, accepted that the precarious financial position of the cooperative bank which was attributed to the fraud amounting to Rs1,200 crore committed on the cooperative bank by the share broking community including Ketan Parekh and his associates in collusion with the then members of the Board of Directors, the RBI statement said.
As per the bank, it said, an amount of Rs803 crore constituting 72% of the total advances were unsecured due to unenforceable securities and defective documentation and hence not recoverable.
The cooperative bank has admitted that the revival of the bank failed due to difficulty in mobilising revival fund from the contributing UCBs and poor track record of recovery particularly from the Ketan Parekh group, it said.
The statement also said that the cooperative bank had furnished another revival plan envisaging a loan of Rs1,000 crore from World Bank or European Banks which will be procured by an NRI who will invest Rs500 crore for the next 10 years in the form of preference shares totaling Rs5,000 crore.
"It was observed that the cooperative bank was neither aware of the antecedents of the investor nor the genuineness of the sources of the funds," it said.
The cooperative bank was not sure whether the proposal will result in a turnaround for the cooperative bank by making its net worth positive, it said, adding, the proposal is also not in conformity with the bye-laws of the bank for of preference shares to an investor who is not a loanee.