In what raises issues of propriety, IDFC Bank, which is IDFC First Bank now, and chaired by Rajiv Lall, had let out premium space in its South Mumbai office to Asia Society India Centre, a not-for-profit organisation, headed by Lall’s wife Bunty Chand, for four years from 2015 to 2019, at a nominal rent of Re 1 a month.
This runs afoul of Section 6 and Section 9 of the Banking Regulation Act, under which leasing out premises and holding it for any purpose other than own use, respectively, are not permitted.
ASIC was provided 800 sq m space way back in 2009 as part of CSR (Corporate Social Responsibility) initiative by IDFC when it was an NBFC, said Deepak Parekh, who was then IDFC Chairman. Continuing the lease post-demerger in October 2015 when the property was transferred to IDFC Bank was a “genuine slip-up” on the latter’s part, he said.
A not-for-profit public education platform, Asia Society occupied 800 sq ft space in IDFC Bank’s Ramon House headquarters in Churchgate. Lall was the bank’s Managing Director between October 2015 and December 2018 when Capital First merged with IDFC Bank and the bank was named IDFC First Bank. He took over as Chairman on December 18, 2018.
While RBI’s illustration on related party disclosure states that the Key Management Personnel and their relatives have to disclose lease arrangements availed or provided, the bank did not disclose its lease to ASIC in the annual reports for 2016-17 and 2017-18.
While it named six individuals including Bunty Chand as relatives of Key Management Personnel (Lall was a KMP), the IDFC Bank’s disclosure for both years reads, “In accordance with paragraph 5 and 6 of AS-18, the Bank has not disclosed certain transactions with relatives of key management personnel as they are in the nature of banker-customer relationship.”
ASIC too did not make any such disclosure in its filings with the Registrar of Companies for the year-ended March 2018. While RoC documents show ASIC paid a rent of Rs 12 per annum for the year-ended March 2019, they also reveal it operated from Ramon House till October 31, 2019 and shifted its office to Maker Chambers V, Nariman Point only on November 1, 2019.
When contacted, IDFC First Bank said, “The deed was cancelled in 2018 before the merger of IDFC Bank with Capital First. Post-merger Asia Society vacated the premises in 2019.”
On his part, Lall said, he was not the Chairman when the decision to lease the space to ASIC in 2009 as CSR initiative was taken. “This arrangement was drawn up with the authorisation of the then Chairman of IDFC, and with the full knowledge of the Board of IDFC Ltd. Post the conversion to a bank in October 2015, the bank converted this arrangement to a lease, but kept the spirit of pro-bono support to Asia Society by charging a nominal rent. Subsequently, in July 2018, the lease was cancelled and Asia Society vacated the premises in around October 2019. I would like to specifically submit that neither me nor my spouse benefited financially from the above in any manner whatsoever, as the benefit of occupying the premises at nominal rent went to Asia Society alone, which is a non-profit institution of international repute dedicated to public education in areas of public policy, international relations and arts and culture.”
Parekh, who was the Chairman of IDFC Ltd in 2009, said, “At IDFC, we had given the office to Asia Society on a nominal rent as part of CSR activity and even the board was aware of it. I stepped down as Chairman of IDFC as they were applying for a banking license almost a year before they got the banking licence. The arrangement with Asia Society had no issues till IDFC had leased it out. However, since banks are not allowed to lease out their premise to anyone, it was a genuine slip up on part of the bank as it continued with the lease agreement till 2018.”
Email sent to Bunty Chand, did not elicit any response.
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