RBI finds Orissa co-op bank guilty in fraud case

Written by Dilip Bisoi | Bhubaneswar, Aug 25 | Updated: Aug 26 2008, 06:34am hrs
The Reserve Bank of India (RBI) has held Orissa State Cooperative Bank (OSCB) guilty in the Rs 153 crore bonds/securities scam. The apex bank has censured the state government-owned bank for irregularities and slapped a penalty of Rs 5 lakh. The RBI has imposed a penalty of Rs 5 lakh on Orissa State Cooperative Bank under Section 46 read with Section 47A of Banking Regulation Act, 1949(AACS), in view of irregularities in the securities transactions, the RBI intimated the OSCB in a letter.

Interestingly, OSCB managing director RN Das had admitted his failure to comply with the RBI directives while executing big-ticket deals, according to documents available with FE. The Orissa cooperative bank had purchased bonds/securities such as 0% ICICI bonds and zero-coupon bonds (ZCBs) of PFC, IIBI, and Nabard from various counter-parties aggregating to Rs 153 crore between April 2006 and October 2007. But the bank lost Rs 33 crore in the deal.

The clandestine deal came to light when Nabard was conducting a statutory audit of the bank. It was found during the audit that the bank had purchased the bonds/securities neglecting all the circulars and guidelines of the RBI.

The audit report pointed out that the bank did not ascertain the market value of the bonds/securities. They were purchased either through prices quoted on stock exchanges or through yield to maturity based prices. As a result, the bank had purchased bonds/securities at a price much higher than the market driven/derived prices.