Cash For Loan SBI Scam

Cash-for-loan SBI scam: Don’t blame bad loans 

for corrupt practices, says Takru Nov 27, 2013-First Post

( You may read views below)

Financial Services Secretary Rajiv Takru today said the in-house panel constituted by the State Bank to probe corruption charges against one of its senior most Deputy Managing Directors Shyamal Acharya, who was sent out on forceful leave since then, will submit its report by weekend. 

Takru, who is on the board of the bank as government nominee, also said it is wrong to blame the high bad assets in state-run banks to corrupt and lax practices in the loan appraisal process and ruled out changing the existing laws and procedures of working of banks. “What has happened is most unfortunate. SBI has come out with their own internal committee and we expect the report of the committee by weekend,” he told reporters after a meeting at the Reserve Bank.

On asked about the prevalence of high NPAs–some state-run banks have reported gross NPAs at over 7 per cent while in SBI, it is over 5 per cent—and if it can be attributed to corrupt practices in loan sanctioning process, Takru said that would be “speculative”. “NPAs are rising for a variety of reasons which you know,” he added. 

He said these allegations do not merit changing any of the laws and procedures of working of state-run banks and added that “we should wait for the law to take its own course. “If anybody is guilty, surely you don’t expect the government to say nothing should be done. If he is guilty, certainly, the law will take its course. But I think its a bit premature, we should not speculate on this,” Takru said. “I don’t think there is anything here which requires a change in law or in procedures,” he added. 

Last Sunday, the Economic Offences wing of the CBI had registered a case against Acharya, who was heading the mid-corporate group at SBI, after raiding his house in Mumbai. Cases were registered against him along with an ex-SBI official KK Kumarah and Chairman of a Delhi-based firm Worlds Window, Piyoosh Goyal, for alleged graft in disburals of Rs 400 crore loan. Following this, SBI on Monday set up a two-member internal panel, comprising two MDs – Hemant Contractor and A Krishna Kumar to probe the issue.

http://www.firstpost.com/business/cash-for-loan-sbi-scam-dont-blame-bad-loans-for-corrupt-practices-says-takru-1253403.html

My Views Are As follows"-------

I salute RBI for the hard decision taken for forensic audit of United Bank of India. I am astonished however that RBI has ignored other banks where NPA ratio was much higher in last quarters. Anyway the step is praiseworthy. I would like to add here that for unbiased report and for knowing the bitter truth without any tapering and any manipulation by auditors in nexus with chief officials of the bank , RBI should keep surveillance of auditors , Bank officials and middleman . 

It is necessary to have CCTV recording of all auditing and if possible to have telephone tape of all officials directly or indirectly involved in sanction of loans. It will be better if the auditors records views of all juniors in processing of loans and how they succumbed to pressure from higher bosses and politicians while according sanction or while recommending sanction of loans despite several shortcomings, deficiencies and violation of policy in the loan proposals sanctioned by them in past years which are now bad.

 Time is ripe now to assess and ascertain the integrity of all CMD and EDs of the bank irrespective of the fact that they are in service or retires from services because it is they who through verbal or telephonic instructions used to build pressures on juniors and it is they who created bad culture in sanction of loans and it is due to their wrong management, now banks are facing the burden of huge NPA and facing erosion of their capital. It is they who have caused loss of public money in write off to the tune of two lac crores, bad debts more than two lac crores and restructure loans moré than ten lac crores. 

Let us see whether RBI is able to do justice with investors and bank staff.

I am of strong view that If head of an organization is strong and honest , there is no doubt that juniors will follow the suit and will not dare indulging in corrupt practice without the support of higher bosses.

SBI Graft Case : Lessons To Be Learnt--

-By Rajesh Goyal

I think most of us have read the news that a case has been registered a case against :-

(a)   Shyamal Acharya, Deputy MD of SBI,  who is also the head of Mid-Corporate wing;

(b)    KK Kumarah, Ex-Assistant General Manager of SBI, who was working as a liason agent for Worlds Window Grouop;

(c)    a businessman Piyush Goyal (founder of the Delhi based Worlds Window Group - an industrial group which imports ferrous and non-ferrous metal scrap, manufactures aluminium composite panels (ACP) and runs India's biggest private inland container depots.)

for alleged graft.  It is a sad day for bankers as the reputation of bankers, in the eyes of general public,  has gone down one step more.

It is reported that  CBI conducted raids at offices and residences of Shyamal Acharya (serving top executive of SBI), KK Kumra (Ex-AGM of SBI) Piyoosh Goyal (a businessman). According to the report published in Mumbai Mirror “Gold and jewellery worth Rs 67 lakh, forty bottles of scotch, and documents showing benami purchase of 10 kilogram of gold were found by the Central Bureau of Investigation at the Napean Sea road residence of deputy managing director of State Bank of India Shyamal Acharya, who was booked on charges of bribery.  CBI during the raid also is reported to have seized an imported pair of watches worth Rs 8 lakh.    It is reported that Piyush Goyal allegedly gifted the watches to Shyamal Acharya to get his credit limit from the bank increased.  Mr  KK Kumra, appears to have worked as a conduit (liaison agent) between receiver and giver of the bribe and actually delivered the watches.

Worlds Window has a credit limit of Rs 250 crore with a consortium of banks including SBI. The bribe had been paid to raise the cap to Rs. 400 crore to fund the company's ongoing expansion plans. SBI's contribution to the increased credit was to be Rs 75 crore. 
 

[In days to come more details / facts will emerge]

The above news was shocking but did not surprise much as every banker is aware that corruption has seeped deep into banking sector too.   Although a majority of the bankers are still honest, yet last few years have seen erosion in the percentage of honest bankers.   

The above news has created a big dent in the reputation of SBI.  Now question is, what are the lessons to be learnt from this episode.    I feel the following lessons are to be noted by all bankers :-

(a)   The practice of employing retired Bank senior officials like CMs, AGMs, DGMs, GMs and sometime even EDs and CMDs  by private companies as liaison officer needs to be stopped.  When I took VRS from the post of AGM, I too was asked about my future plans, and were given feelers by some to work as liaison officer for some company to earn handsome income.  I was already aware of the nature of work done by such agents, and thus strongly resisted all attempts and told that it is not in my blood to do such a work, as had I to do such a thing, I would have continued in the Bank at least till my retirement.   I am aware of many DGMs / GMs who have opted for such jobs to earn easy money.   However, by getting loans sanctioned without merits, they are actually encouraging not only corruption, but also party to the ever increasing NPA in banks.   There is a strong need for banks to deliberate on this issue as tohow to stop entertaining the credit proposals being pushed through by retired officials by receiving commission / fee.

(b)   Secondly, at the time of promotion, there is a need to find out the life style of the senior executives.  Banking industry is the only industry which directly deals with money.  Thus, there is a need for more stringent rules in profiling the officers.  People who are extremely found of wine, jewellery, women,  needs to be double checked for their honesty in the past.  Executives who are fond of jewellery, high value commodities (like watches) and wines are easy target for the businessmen as they are likely to become corrupt at first available opportunity to enjoy such a life style.   To amass wealth beyond a particular level is like a disease.  We need watches to check the time, which is now a days available even on mobile.  Except officers / workmen who have inherited wealth and declared the same to bank,  no banker can afford to have watch of few lakhs  rupees.  A banker with such style  is likely to turn corrupt as these are beyond his means.   Personally speaking for last few years, I hardly wear a watch as I use my normal mobile to check the time as I feel it provides me much more accurate time than a normal watch.  However, I do not mean, bankers should not wear a watch, but a watch of say above Rs 20,000 can be rarely be afforded by a banker or his spouse.   Some bankers are certainly not likely to like that bank should do such a profiling, but honest bankers will certainly welcome this move.

(c)    There is a growing trend to rope in middle men in the loans being sanctioned these days.   There is a growing trend in last decade or so that most of the big loans are routed through agents, some of them through professional CAs.   I still remember, when I was CM at a Branch,  our Zonal office / Circle Office used to call meetings of  agents / CA at 4 or 5 star hotels and  asked all Incumbents to attend the same to garner business.   Such meetings encouraged many agents to roam around branches and find out Managers who are ready to take bribes and sanction loans based on tailor made documents / balance sheets.   I do not see anything wrong if a genuine CA  is contacted by Managers to get certain clarifications on Balance Sheets.    But liaison agents work as middle men for negotiating and transferring black money should be avoided at all costs, even if it means loss of business.   Middlemen encourage corruption and bribe as it is safe for both the parties – Incumbent and the Borrower to indulge in corruption through such men. 

 In case there are corrupt officials even at a higher level, it becomes much easier for them to ensure that such honest people are transferred by dubbing them as non performers.

Based on my personal experiences and the feedback we receive through our website, SBI is considered as much less corrupt than many other nationalized banks.  I can say that it is becoming more and more difficult for an honest banker to survive and move up in the ladder.   I am witness to the fact that top executives who were perceived to be highly corrupt by a general banker in the field, got the fastest promotions and are now CMDs, EDs in public sector banks.  Their stories of corruption still go around.

Retired bankers or bold bankers can share their experiences in the comments columns (without disclosing their names / bank name / zone name).  

Some examples about the methods adopted by corrupt officers,  will help honest people to save their skin from dishonest bankers.