Thursday, October 15, 2015

Trying times at India's banks? Human Resource risk aggravates Operational risk.? Accountability of the regulators?

The executives and governance tiers of India's public sector banks and regulators seem to have much to be ashamed of as exemplified by: 

1) It is reported that Rs. 6,172 crore  ( Rs  1 billion = 100 crore ) was remitted from Bank of Baroda to Hong Kong as payments for non-existent imports in  cashew, pulses and rice. The amount was purportedly  deposited in 59 accounts in cash as advance for imports that never existed. The amount remitted in each instance was below $100,000. These remittances were presumably an advance towards imports ;  in most of the cases, the beneficiary was the same. The  exchange-related transactions were carried out in newly opened  accounts. Heavy cash receipts did not seem to trigger exceptional transaction report (ETR). The bank should have monitored the high-value transactions and reported suspicious transactions. The systems and procedures were flouted. 

2) It is reported that at Bank of Baroda there has been a  bill discounting scam in Gujarat by a textile borrower involving Rs 350 crores also.

3) There has been  non-payment of dues by Mr. Ramachandran 's Atlas Group, an Indian jeweller with operations in the Gulf. BoB has an exposure of 70 million dirhams or Rs 120 crore through its Dubai branch. The Atlas group owes 20 banks a total sum of Rs 1,000 crore according to press reports.

4) The recent transfer of BoB’s Executive Director KV Ramamoorthy to United Bank, reportedly  due to certain transactions made by the Dubai branch which were allegedly not in compliance with existing rules  seems to indicate managerial and executive connivance or complacency.


 5) The cup of woes of United Bank of India is over full. Archana Bhargava  chairperson and managing director, who had a  brief stint of about 10 months brought  accounting malpractices at the Kolkata-based United Bank of India to the Reserve Bank of India (RBI) attention but had to leave for some reason .  By sending Ramamoorthy there, the regulators seemed to add to the bank's non performing assets! 

5) Mr Jain CEO  of Syndicate Bank was arrested by CBI for allegedly taking a bribe of Rs 50 lakh for increasing credit limit of some companies. He was held for allegedly negotiating with Bhushan Steel for 'illegal gratification' in return for granting credit extension to that company as it had defaulted on payment of loan instalments amounting to crores of rupees to the bank.

7) Vijay Mallya’s  Kingfisher's borrowings from   17 banks including the largest of all  State Bank of India (SBI) exceed Rs 7,000 crore of non perforing loans with interest overdue. Central Bureau of Investigation (CBI) has found that Mallya even diverted part of the loan amount to tax haven countries.  It is investigating the IDBI case and this enquiry is likely to spread to other banks.

Regulators   seem lost in making exhortation speeches rather than taking action. 

This blog's views are academic views expressed without any risk or responsibility. The blog recommends no investment 

No comments:

Post a Comment