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  1. IDBI Bank Fraud Case: Probe report to seal fate of top bankers

IDBI Bank Fraud Case: Probe report to seal fate of top bankers

In sync with the approach it adopted in the $2-billion fraud case at Punjab National Bank (PNB), the government will ask for the removal of top bankers in connection with the alleged Rs 600-crore IDBI Bank loan fraud case if their involvement is established by the probe agency, a senior official told FE.

By: | New Delhi | Published: May 16, 2018 5:09 AM
IDBI Bank, MCLR, IDBI Bank hikes MCLR, SBI, HDFC Bank, ICICI Bank, Bank of Baroda, lending rates, RBI IDBI Bank is saddled with bad assets and is already under the prompt corrective action framework of the Reserve Bank of India.

In sync with the approach it adopted in the $2-billion fraud case at Punjab National Bank (PNB), the government will ask for the removal of top bankers in connection with the alleged Rs 600-crore IDBI Bank loan fraud case if their involvement is established by the probe agency, a senior official told FE. Former IDBI Bank chief Kishor Kharat — who is currently the managing director (MD) and chief executive officer (CEO) of Indian Bank — and current Syndicate Bank MD and CEO Melwyn Rego — who was earlier the deputy MD of IDBI Bank — were booked by the CBI late last month over a controversial loan provided to companies of former Aircel promoter C Sivasankaran that has turned non-performing asset.

The CBI is currently investigating the fraud case and is expected to file the charge-sheet soon, which will effectively decide the fate of the top bankers. The premier investigating agency has booked 15 senior officials of IDBI bank, including the retired ones, and 24 private officials — including directors and chairmen — and their companies. Among those booked is MS Raghavan, who earlier served at IDBI Bank as its chairman and MD. The 15 senior officials worked at IDBI Bank between 2010 and 2014 when the loans were sanctioned.

“Anybody who is found to have been involved in this fraud by the investigative agency will have to go. However, action won’t be initiated against those who are not indicted in the probe reports,” said the official. “The message is simple and clear: ‘We won’t spare the dishonest and we won’t harass the honest’.”

On Monday, after the CBI named three top bankers in its first chargesheet in the PNB fraud case, the government swiftly asked Allahabad Bank board to divest of power its CEO Usha Ananthasubramanian, who was at the helm of affairs at PNB until last year. Two executive directors of PNB — KV Brahmaji Rao and Sanjiv Sharan — were also stripped of powers.

IDBI Bank is saddled with bad assets and is already under the prompt corrective action framework of the Reserve Bank of India. Thanks to its massive provisioning requirements against bad assets, IDBI Bank was allocated the highest capital (Rs 10,610 crore) when in January, the Centre announced details of its massive recapitalisation package (Rs 90,000 crore for 2017-18).

Indian Bank and Syndicate Bank are not in the list of 11 stressed banks that are under the PCA but are still facing challenges due to stressed assets. Indian Bank reported a 59% drop in net profit in the March quarter as provisions for bad loans almost tripled.

Financial services secretary Rajeev Kumar has already made it clear that while the government will not interfere in the commercial decisions of the public-sector banks, it will ensure the highest standards of corporate governance at these lenders.

On Monday, after the government’s decision to seek the removal of three top bankers to send a clear signal that accountability will be fixed in case of any fraud, Kumar also sought to address concerns of honest bank officials, saying action won’t be taken against any management just on the basis of hearsay.

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