MUMBAI, June 11: A preliminary investigation by the Central Bureau of Investigation (CBI) in the past two days has revealed several `gross irregularities' on the part of State Bank of India (SBI) in the Rs 1,200-crore CRB scam. Following are details of the charges levelled by the agency and SBI's response to the charges.

n State Bank failed to check the antecedents of the company before extending the facility. The facility, which is given only to `esteemed companies' as it does not generate much business for the bank, was given to an `upstart' company like the CRB.

State Bank replies: Since this is a prefunded facility and treated like a deposit account, quite a few other companies have also been extended this facility. When we gave them this facility in June 1996, it was rated as one of the top NBFCs. It was also holding an in-principle approval of the RBI to establish a private bank. Their deposits were also rated A+ by CARE.

According to market reports, they were considered to be highly creditworthy. In case of deposit accounts, there is no need for the bank to go into detailed inquiry. We just did the routine inquiry.

SBI has no mandate for FD repayment facility as it has no guidelines, no circular for it.

State Bank: FD repayment facility has been extended to many companies, including NBFCs. There is a provision for payment at par for FD.

CRB's application for the facility was `hardly processed'. Bhansali has deposited only Rs 50 lakh as FD and promised Rs 1.5 crore as share collateral. The SBI letter granting him the permission was given fifteen days before the actual sanction was given and no condition was mentioned and neither were any shares taken.

SBI replies: The letter of terms and conditions was given to him three days after the sanction in June. The documents for this facility were executed in July, and the account became operational in August. However, SBI declined to comment on its failure to obtain the collateral.

In November 1996 and February 1997, even though CRB had defaulted on payments the facility was not withdrawan.

Admitting the default, the SBI replies: Though CRB's FD refund order account was rendered irregular for a couple of days in November 1996 and February 1997, it was for a small amount vis-a-vis the total turnover of the company.

Considering the fact that the account was conducted satisfactorily in the past and in such cases, normally the bank expects the account to be regularised immediately. The facility was not withdrawan at that point and in fact CRB did regularise the account by crediting sufficient funds.

In March 1997, though its debit balance was Rs 1.5 crore, Bhansali continued to withdraw amounts to the tune of Rs 2 crore every day from March 8 till March 19. Why weren't the accounts frozen?

SBI: In the second week of March, the company was asked to regularise the account immediately, at which point the company assured the bank that the overdraft was due to a mismatch in their liquidity position and they would regularise the account in the next few days but did not. When it was noticed that the company did not fulfil its commitments and the pipeline debits representing warrants purchased by other branches started coming in, the facility was cancelled in fourth week of March and the company was asked to pay the outstanding amount.

Despite a ceiling of Rs 25,000, the SBI inserted a special clause that Bhansali could increase the amount of the withdrawal by alteration of the warrant with his signature. As a result, he would cancel the amount himself and wrote the warrants in the name of shell companies of which he was the ultimate beneficiary.

SBI replies: Increasing the amount of each warrant duly authenticated under the manual signature of the authorised signatory of the company is in accordance with the normal terms for such a facility. Few other companies have also been extended similar facilities.

SBI flouted the norms by continuing the facility even when Bhansali failed to produce a list of warrants duly signed by him. Bhansali stopped giving the lists in February and did not sign earlier ones.

SBI: The reason why earlier lists did not have his signatures was because the list was computerised and the covering letter bearing his signature may have got ``detached.'' Admitting that CRB had stopped giving the lists in February, the State Bank of India official said that when they stopped giving the list the matter was immediately taken up with the company and were asked to submit all lists and ensure prefunding ``which obviously they did not comply with.''

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.