Action In Dena Bank Scam

Management of Dena Bank has suspended Branch Manager of Malabar Hill  Branch where the alleged fraud  of Rs.217 crore occurred. It is common sense and known to all bankers that a Branch Manager cannot dream of sanctioning Rs. 200 crore to anyone without sanction of higher officials. Value of Delegated powers to branch manages is  normally around one to five crore only depending upon his scale and that too when it is secured by bank's FD.

 And even if it is assumed that BM has not taken permission of higher officials before disbursing of such high value loan ,(Though it is supposed that he has  taken sanction for the same ,) since it is high value loan , the established practice in all banks say that officials of controlling office use to present  information related to such high value loans to concerned Regional Head, Zonal Head and CMD .

It is beyond imagination that an officer of the rank of Executive Director or CMD is not aware of such high value transaction taking place in any branch.And if ED and CMD are ignorant of such high value loans sanctioned by any branch , they should leave such post without delay or GOI should  kick out such chiefs.

 Whenever there is credit spurt or abnormal rise in deposit of any branch , it is the duty of officials of controlling office to place the same before ED and CMD. There is no doubt that management of bank , has as usual made Branch Head as scapegoat and exonerated the real guilt ED and CMD who might have undoubtedly  ordered  Branch Manager  orally or on phone to go ahead in sanction of high value loan as because it was reported to be secured by Fixed Deposits of higher value. It is the fault of officials sitting at Central Office and immediate controlling office who did not think it necessary to verify the records before giving oral concurrence.

It is therefore desirable that RBI, CVC and  MOF take cognizance of such costly blunders of ED and CMD of Dena bank or OBC and punish real culprit and cancel the order of suspension of branch manager of Malabar Hill branch of Dena Bank who have been made scapegoat .

Forensic report to be ready in next ten days: Dena Bank chief -Hindu Business Line

New Delhi, Aug 23:  

Dena Bank expects the forensic investigations report on its Malabar Hill branch scam to be available in the next ten days, its Chairman and Managing Director Ashwani Kumar has said.

 

Professional services firm Deloitte is looking into the matter post the Finance Ministry’s directive that forensic investigations be carried out on the scam, Kumar said.

 

“We came to know (of this scam) in the first week of July and that is why the first part of provision was made in the April-June quarter itself. We are hopeful of recovery”, Kumar told Business Line .

 

The scam would this fiscal blow a ₹ 217 crore hole in the bank’s profit and loss account with the top management deciding to provide for the entire outstanding overdraft of ₹ 217 crore.

 

At the request of the bank, the Reserve Bank of India (RBI) had as a special case recently allowed Dena Bank to amortise the provisioning requirements for this fraud (Malabar Hill branch in Mumbai) equally over four quarters during 2014-15.

With a sum of ₹ 54.29 crore already provided in the just ended April-June quarter, the balance (₹ 162.8 crore) will be provided equally in subsequent three quarters, Dena Bank said in a recent filing to the stock exchanges.

This was a reiteration of the point number 6 in the ‘Notes to Accounts’ forming part of the first quarter unaudited results released on August 9.

 

Kumar said that the bank could have opted for treating the misappropriated amount (estimated at ₹ 217 crore) as contingent liability, but decided otherwise.

 

“We are making a provision only. On recovery, this could be written back”, Kumar noted.

 

The scale of provisioning involved - arising from the fraud—was significant given that the money misappropriated was equivalent to almost forty per cent of the net profit of ₹ 538 crore reported by the bank in 2013-14.

“This level of provisioning and that too arising from one branch is too vulgar for any comfort”, said a banking industry observer.

 

There is a need for greater scrutiny on the source of funds and whether due diligence was done on the depositor, it was felt.

The Central Bureau of Investigation (CBI) is already looking into the matter after Dena bank lodged a complaint with them.

 

SCAM EXPLAINED

 

The Malabar Hill branch of Dena Bank had received bulk term deposits from various entities/government organisations between January 30, 2014 and May 5, 2014.

 

Subsequently, term deposits amounting to ₹ 256.69 crore were pledged to the bank by the same signatories to obtain overdraft facilities of ₹ 223.25 crore (present outstanding ₹ 217.17 crore).

 

The funds were surreptitiously transferred out of the bank by creating fake overdraft facility, resulting in fraud on the bank and the concerned entities/government organisations.

 

The erring branch manager has been suspended and also the branch staff have been transferred, according to Dena Bank’s filing with the stock exchanges.

Bank Officer In Recruitment And Loan Scam

8 Indian Overseas Bank staff behind bars for job scam-Times of India/2nd August 2014
CHENNAI: The CBI on Thursday arrested eight Indian Overseas Bank employees holding key positions in a staff union for malpractice in the recruitment of sweepers and messengers at the bank's headquarters in Chennai.

Investigators said the accused forged SSLC certificates of the recruits to show that they had failed Class 10 and were not overqualified for the jobs. 

After CBI raids at their residences early this year, the employees were placed under suspension. "It was a sudden development in the case," a CBI officer said. "The arrested people had recruited sweepers and messengers in Chennai, Tuticorin, Karaikudi, Vellore, Salem and Thanjavur in 2010." Those arrested are IOB union state general secretary Chinni Krishna and assistant general secretaries Umapathy from Vellore, Rangarajan from Karaikudi, Swaminathan from Thanjavur, Balasubramanian from Chennai, Kandasamy from Salem, Thomas Balan from Tuticorin and Soundararajan from Puducherry. All of them are senior clerical cadre employees in various branches of the bank. The arrested were produced before the 11th CBI court in Parry's, where the judge remanded them in judicial custody till August 14. They were taken to the Puzhal prison. 

Based on an input that many candidates managed to get appointment using fake certificates, CBI's anti-corruption branch in Chennai had registered a case and conducted searches on the bank's establishments in different parts of the state in May. 

IOB general manager (human resources) Indira Padmini said, "The matter is with the CBI. The people involved in the case were already under suspension." Inquiries revealed that many daily-wage workers had managed to get appointment letters with assistance from some union leaders after paying money. 

The officials said the allegation was that as many as 951 people recruited as daily-wage workers in the bank for several years were made regular in 2010. The educational qualification for the post of sweeper and messenger was SSLC failed. Many applicants who had passed SSLC or Plus-Two produced fake certificates claiming that they had failed in Class 10. 
http://timesofindia.indiatimes.com/city/chennai/8-Indian-Overseas-Bank-staff-behind-bars-for-job-scam/articleshow/39454362.cms

CBI arrests four bank officials--The Hindu

The Central Bureau of Investigation (CBI) arrested four senior officials of a nationalised bank on the charge of taking bribe and produced them before the CBI court here on Friday.

The officials took bribe to the tune of several lakhs from temporary employees of the bank in the southern region with a promise to regularise their services. Following complaints from the temporary staff, a departmental enquiry was conducted.

The four officials were found guilty and dismissed from service. Sessions Judge M.M. Krishnan remanded them in judicial custody till August 14.

http://www.thehindu.com/todays-paper/tp-national/tp-tamilnadu/cbi-arrests-four-bank-officials/article6274200.ece

Bank staff, chief arrested for multi-crore loan fraud-Times of India-2nd August 2014

SHIMOGA/ BANGALORE: Unearthing a multi-crore scam involving disbursal of gold loans by a cooperative bank, Shimoga police on Friday arrested 18 staff members of the Shimoga District Central Cooperative Bank (SDCCB), including its president Manjunath Gowda, for their alleged involvement in irregular practices. 

Gowda and the bank employees were charged with disbursing loans against fake gold, and in some cases, with no gold being mortgaged against the money advanced. According to a preliminary probe, the bank incurred a loss of Rs 68 crore for non-compliance with rules in issuing gold loans, which police feel may cross Rs 100 crore. 

The arrested were booked under sections 420 (cheating), 406 (punishment for criminal breach of trust), 408 (criminal breach of trust) and 409 (criminal breach of trust by a public servant in a bank) of the IPC, and 120B of Misappropriation of Bank Funds. 

The scam broke out early in July, after the bank's general manager Nagabhushan lodged a complaint with Doddapet police on July 15, alleging large-scale financial irregularities in the Amir Ahmed Circle branch in Shimoga city. 

Realizing the proportion of the fraud, Shimoga SP Koushalendra Kumar ordered a probe, and police seized several documents, including papers relating to illegal investment in various properties, gold-coated silver worth Rs 10 crore and cash. 

The issue figured in the legislative council on July 26, and cooperation minister HS Mahadev Prasad ordered a CID inquiry into the gold loan fraud across 28 branches of the SDCCB. 

When the fraud was first unearthed, it was found that only three bank staffers and the manager had sanctioned gold loans against deposits of fake gold, and in some cases, without any gold. A detailed investigation resulted in police arresting 18 persons, including Gowda, his driver, general manager and complainant Nagabhushan, seven staffers of the Gandhi Bazaar branch, five gold appraisers and two members of a rowdy group involved in underworld activities. 

A report on the arrests made and investigation so far was sent to the state government and Reserve Bank of India, the SP said. 

Don't worry, depositors told 

As news about the arrests spread, depositors started thronging the bank's branches to withdraw their deposits and pledged gold. These were small depositors who had pledged pure gold to avail of loans from the bank. 

Seethamma of KR Pet, a vendor, had availed of Rs 50,000 by depositing her valuables. She has been visiting the bank every day since the fraud came to light, and has even borrowed money to withdraw her pledged gold. 

According to officials of the Karnataka State Cooperative Apex Bank, there is no need for depositors to panic as the SDCCB is a subsidiary and comes under the purview of RBI guidelines. The bank has total deposits to the tune of Rs 1,000 crore, with a turnover of Rs 1,800 crore. 

A senior police officer said all deposits would be returned to the investors with full maturity value, and the money defrauded will be recovered from the accused after investigation is complete. 

Rajya Sabha MP Ayanur Manjunath has written to Nabard, seeking supercession of the bank and inspection of its records by Nabard. 

Who is Manjunath Gowda? 

Manjunath Gowda, 56, was once a close associate of former chief minister BS Yeddyurappa. He was appointed vice-president of the Karnataka Janata Paksha (KJP), which the former CM founded after he fell out with the BJP.

Gowda contested from Thirthahalli assembly constituency in Shimoga district on a KJP ticket in the 2013 assembly elections, and lost by a narrow margin of 120 votes to primary and secondary education minister Kimmanne Ratnakar. When Yeddyurappa returned to the BJP, Gowda did not follow him. 

http://timesofindia.indiatimes.com/city/bangalore/Bank-staff-chief-arrested-for-multi-crore-loan-fraud/articleshow/39453552.cms

CBI court sentences bank officer to one-year RI in Chennai-The Hindu

The CBI court on Wednesday sentenced a State Bank of India officer to a year’s rigorous imprisonment in a fraud case.

The anti-corruption branch of CBI, Chennai, registered a case against M. Murugappan, clerk-cum-typist at State Bank of India, Ambattur Industrial Estate branch, alleging he had cheated the bank by opening savings accounts in his relative’s names without their knowledge, during 1993-97.

He forged signatures and misappropriated funds entrusted to him by crediting the money in the fake accounts and withdrawing the proceeds.

He also destroyed evidence gathered against him. This resulted in the bank losing over Rs. 31 lakh.

Following trial, E.M.K. Siddharthar, XI additional special judge for CBI cases, convicted Murugappan and slapped a fine of Rs. 40,000 on him.

http://www.thehindu.com/news/cities/chennai/chen-crime/cbi-court-sentences-bank-officer-to-oneyear-ri-in-chennai/article6265247.ece

Man accused in bank fraud case escapes from police station in Indore-Hindustan Times

According to Palasia police, Ritesh (30), a resident of Somani Nagar, called the sentry, Vijay Singh, at 3.15am and said he had to answer nature's call.

Singh opened the gate and took him out of the lockup. Ritesh suddenly pushed Singh and fled from the police station.

Singh raised an alarm and those present in the police station launched a search for Ritesh in nearby areas but could not find him.

On Wednesday, Ritesh and his accomplice, Santosh Malviya were arrested for fraudulently withdrawing Rs.2.9 lakh from a bank account in Palasia.

A senior police officer said they will fix responsibility on those who were on duty and action would be taken against them.

Bank of America fined $1.3 bn for mortgage fraud

A US judge Wednesday ordered Bank of America to pay a $1.3 billion penalty for selling bad loans to mortgage finance firms Fannie Mae and Freddie Mac amid the housing crisis.

The penalty comes after a New York jury in October 2013 found that Bank of America and Countrywide defrauded the two US mortgage giants in a lending program in 2007. Bank of America bought Countrywide in 2008.

The program was "from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims, but also on the financial system as a whole," wrote US District Judge Jed Rakoff in the penalty order.

The US Justice Department alleged that Countrywide created the so-called "Hustle" program in 2007 as government-backed Freddie and Fannie were tightening their underwriting guidelines and loan purchase requirements in response to rising mortgage defaults.

Countrywide allegedly eliminated key checkpoints on loan quality and compensated employees solely based on loan volumes, leading to "rampant instances of fraud" as Countrywide informed the loan-finance firms that it had tightened requirements, the Justice Department said in court papers.

While writing that the fraud "more than warrants" the $1.3 billion penalty, Rakoff said Bank of America should not have to pay the full $3 billion associated with the 17,611 Hustle-generated loans purchased by Freddie and Fannie.

The reason is that a "meaningful" number of the loans were of "acceptable quality," the judge said. He cited a US government expert who estimated that 57.2 percent of the Hustle loans were not "materially defective."

Rakoff also imposed a $1 million penalty on Rebecca Mairone, a former Countrywide executive whom the jury found helped perpetrate the fraud.

The jury`s decision and the subsequent penalty "make clear that mortgage fraud cannot be viewed as simply another cost of doing business in the financial world," said US Attorney Preet Bharara.

A Bank of America spokesman criticized Rakoff`s order.

"We believe that this figure simply bears no relation to a limited Countrywide program that lasted several months and ended before Bank of America`s acquisition of the company. We`re reviewing the ruling and will assess our appellate options."http://zeenews.india.com/business/news/international/bank-of-america-fined-1-3-bn-for-mortgage-fraud_105100.html

Key Challenges Are Fraud, Bribery And Corruption

Fraud, bribery, corruption remain key challenges for India Inc: Ernst & Young-Financial Express

Fraud, bribery and corruption remain key challenges for Indian Inc even as majority of senior executives surveyed justified 'unfair actions' undertaken to tackle the economic downturn, says a report.

According to Ernst & Young's global fraud survey, 71 per cent of senior executives surveyed in India consider fraud, bribery and corruption as significant concerns for corporates.

The survey revealed that unethical behaviour still persists, with a majority of respondents justifying unfair actions undertaken to survive the economic downturn.

"Personal gifts, cash payments and offering entertainment to win or retain the business, and mis-stating the company's performance has emerged as consistent problems in the corporate environment," the report noted.

The survey was conducted among over 50 CEOs and senior executives in the country across functions such as finance, internal audit and sales among others.

As per the survey 55 per cent of respondents are more concerned about cybercrime perpetrated by employees or contractors as compared to hackers.

"The market sentiment continues to be challenged by the ever growing risks around fraud, bribery and corruption. Over the last few years, corporate India has seen compliance levels stall as management has focused on dealing with economic uncertainties and changes in the Indian regulatory landscape," E&Y India Leader for fraud investigation and dispute services Arpinder Singh said.

In this increasingly competitive market, most firms are under intense scrutiny to perform better than expected.

Given the pressure that exists to meet financial targets, 80 per cent of the senior executives surveyed considers that having more flexible product return policies, changing assumptions to determine valuations or reserves, backdating contract can be deemed as acceptable reasons to achieve those targets. Indian companies seem to be fatigued in their compliance efforts as only 71 per cent of respondents said that senior management has strongly communicated its commitment to anti-corruption policies. This is low compared to last survey, when the figure stood at 88 per cent.

Moreover, only 50 per cent of respondents said that there are clear penalties for breaking anti-corruption policies - this is again significantly lower compared to last time (72 per cent).

Besides, the trend of conducting anti-corruption trainings appears more in principle than actual adoption as only 29 per cent of respondents have attended such training programme.

Additionally, 47 per cent people surveyed said that their companies have whistleblowing hotlines.