Breaking News Scam Oriental Bank Dena Bank

OBC, Dena Bank figure in 436 crore FD scam-DNA-21st August 2014

The Union finance ministry has unearthed a scam involving public sector banks. The ministry fears the Mumbai-based branches of Oriental Bank of Commerce and Dena Bank have misappropriated FUNDS to the tune of Rs 436 crore.

It has ordered a forensic audit and has referred the case involving Oriental Bank to the Central Bureau of Investigation (CBI). Chairmen of both banks were not available for comment and didn't respond to e-mails. Dna has a copy of the finance ministry’s initial findings.

Only recently, another public sector bank, Syndicate Bank, got embroiled in a bribe-for-loan scandal running into Rs 8,000 crore.

What's the Dena Bank scam?

A branch manager mobilised fixed deposits (FDs) to the tune of Rs 256.49 crore from seven corporates. This was mobilised using middlemen. All formalities relating to opening FDs were done by middlemen. Once the FD was raised, fake fixed deposit receipts (FDRs) were sent to the organisations. The bank will retain the original FDR. The middlemen will then propose sanctioning of loans to some other organisations against the original FDRs. Loans are then disbursed in the third party accounts of these organisations. This scam was detected a month back.

What's the OBC scam?

Misappropriation of FUNDS to the tune of Rs 180 crore was reported. This amount was deposited by an organisation as fixed deposit (FD). As the organisation didn't have an account in the branch, the branch manager transferred the funds to the sundry account. A sundry account is where the deposits of those who do not have an account in the branch is parked. FDs mostly get deposited here for the period till the account is opened. This MONEY was again deposited in the current account, which, banking experts say, is wrong and must have been done to beef up the low interest deposit of the bank and fudge figures to meet the current account target. From here, the money was routed to third-party accounts.

When did the scam come to light?

When OBC didn't open the FD account of the organisation at all, officials of that company complained about non-receipt of FDR. That's when the scam became public. The bank has already recovered Rs 110 crore and the CBI is examining the case now. Once the agency establishes a criminal intent in laundering FD money, there could be serious consequences for officials involved.

But were there no alerts?

Yes. Alerts were generated and the controlling officer of OBC questioned the branch manager but no action was taken.

What will happen to these bank officials?

The concerned branch officials are on finance ministry radar. The ministry cautioned all bank CMDs, through a communication last week, about such cases. “There are apparent procedural lapses by bank officials. Malafide, if any, on the part of the bank staff as well as officials of the companies which open these bulk deposits can be established only after investigation,” the ministry said.

What's the ministry doing now?

It has now issued guidelines to banks on how to handle bulk deposits.

Nipped FD scam in bud; recovered Rs 110 cr: OBC According to media reports, the Finance Ministry has unearthed a scam involving public sector banks. According to it, OBC and Dena Bank's Mumbai branches misappropriated Rs 436 crore worth funds.

Did top defaulter divert Rs 6,500 crore loan funds abroad?-Times of India

NEW DELHI: Evidence emerging from India's second largest bank loan default raises suspicion that there was a criminal conspiracy to defraud Indian public sector banks of about Rs 6,500 crore and take most of the money out of the country or divert it to other projects.

The Winsome Group, which is into diamond trading, has now accumulated defaults of Rs 6,581 crore on loans from a consortium of 15 public sector banks — bringing it in competition with Kingfisher Airlines for the tag of India's highest NPA (non-performing asset).

The credit was given to three group companies — Rs 4,366 crore to Winsome Diamond & Jewellers, Rs 1,932 crore to Forever Precious Diamond and Jewellery and Rs 283 crore to Suraj Diamonds.

Starting March 2013, the group started having problems repaying the loans. The banks sent a notice to it as a wilful defaulter on October 15, 2013, and in recent months the loans have been declared as NPA. Last month, the Central Vigilance Commission referred the case to CBI for criminal investigation.

Winsome promoter Jatin Mehta told the banks that his buyers of gold in UAE had defaulted on payments, making him unable to repay the loans. According to Mehta, the buyers suffered losses of $1 billion in derivatives and commodities trading.

Documents accessed by TOI show the story may not be so simple. The evidence raises questions about the oversight exercised by banks, customs department and regulatory bodies, especially those in the financial sector.

According to Winsome, 80% of its exports went to just six companies based in Sharjah, UAE. Interestingly, these firms have a common ownership.

Winsome has 13 distributors in the Middle East, of which 12 are controlled by one Haitham Sulaiman Abu Obaida. He owns Italian Gold FZE, and has the power of attorney on behalf of the other distributors. According to documents with TOI, it is now clear that Obaida also controlled some of the suppliers of Winsome, and fully owns at least one of them, Al Noora FZE, a key supplier of Winsome.

Raising questions about the so-called distribution network of Winsome, documents show that 10 of its distributors were incorporated only in 2012, five on the same day, June 25, 2012.

The 11th distributor, Al Mufied Jewellery FZE, was registered in 2010. The 12th distributor is a company named Al Alam Jewellery FZE, incorporated in 2010 in the Ras Al Kaimah Free Zone and had Suneil Mehta as its director. It is not clear who Mehta is, but Al Alam Jewellery is fully owned by Herald International, which is based in the Bahamas, a tax haven. At least one bank has now reported that Al Alam is a related entity of Winsome, and not an independent distributor as claimed by Mehta to the banks.

Besides the strange nature of its so called official distributors, it is now clear that the group used to export gold jewellery and coins to 28 entities in Dubai and Middle East that were owned by Jatin Mehta and family.

Some employees of the Winsome group interviewed by private investigators hired by a creditor bank said that Italian Gold of Abu Obaida was not known as a distributor, nor did it have any known storage facilities in UAE and Saudi Arabia. According to these investigations, Italian Gold and other distributors do not seem to have the collective capability to lose a billion dollars, as claimed by Winsome when it defaulted. Worse, there are now indications that Winsome may not have provided such large scale credit to its distributors.

According to inputs from private investigators and auditors accessed by TOI, there is evidence to show that the four shipping companies engaged by Winsome for transporting gold may not have carried the amount of gold that Winsome claims to have sent out of India.

Also, there are several discrepancies in shipping bills of Winsome. For example, in Chennai SEZ, the challan was custom-stamped on one day while the shipping bill was custom-stamped several days later.

The emerging evidence raises suspicion that a part of the loan given by government banks was taken out of India and diverted to businesses outside India. Incidentally, Winsome group's promoter Mehta is no more in India, and is suspected to be in Singapore.

According to files accessed by TOI, there is suspicion that some of the money raised from the banks was also diverted to real estate investments in Mumbai and Dubai. TOI is holding back the name of at least one project in Mumbai, owned by a major business house, into which some of the money of Winsome is suspected to have flown, according to the report from one of the affected banks.

The collateral security provided by Winsome is worth just about Rs 250 crore. And, Jatin Mehta may not have many assets in India. He used to take commercial spaces on rent, and operated through his trusted staff and managers. Investigators have so far been able to track down just one property owned by his family members, a flat in his mother Gunvantiben Mehta's name in Malabar Hill in Mumbai.