Amanath Bank under RBI scanner

After a string of co-operative banks in Gujarat, Andhra Pradesh and Maharashtra went bust due to mismanagement and fraudulent practice, Amanath Co-operative Bank is the latest entrant to come under the RBI’s scanner. Reason: Unhealthy banking practices. Something which has forced the RBI to direct the bank to place a report before it on steps taken to correct its course.

On its part, the Amanath Co-operative Bank has lodged a formal complaint with the Police, accusing three employees—GM Mohammed Asadulla, branch manager D.M. Shafiulla and accountant K. Hidayathulla—of misappropriating funds and causing losses to bank.

Earlier on Wednesday, State Home Minister Mallikarjun Kharge announced a Corps of Detectives (CoD) probe into the issue.

The RBI report is more specific. It has indicted the bank’s Board of Directors and their relatives of ‘misuse of funds’ in the form of loans and advances availed.

‘Most of them have been availed of by the bank and their relatives. The staff had opened fictitious accounts and siphoned off huge amounts. The management has eight fresh accounts of Rs 55.71 crore, which are totally fictitious. They have allowed major limits at the instance of the ‘general manager’ or the members of the board directly or indirectly,’ the RBI pointed out. However, former president of Amanath Cooperative Bank K. Rehaman Khan, has placed the blame squarely on the GM. ‘‘The main problem was the general manager, who made certain transactions without informing the Board or me. We have securitised his investments and regularised the loans, so that the money will not be lost,’’ he said.

The RBI has also highlighted the fact that of the Rs 300-crore loans sanctioned by the bank, Rs 174.48 crore—nearly 58 per cent—were non-performing assets (NPAs). A point disputed by Khan. ‘‘The bank’s assessment is around 18 per cent (of NPAs),’’ he said.

Though he did agree that lending to directors had exceeded the stipulated limit of 10 per cent of total lending, Khan said: ‘‘The main reason is because of the accumulation of interest charges on the loan.’’ Then, in what could be a construed as a direct attack on the institution’s directors, the RBI noted that the Bank had written off debts and waived interest charges on a large number of loans. ‘‘This includes Rs 4.44-crore unsecured loan to one Ziaulla Sharief and waiving off of principal and interest worth Rs 30.25 lakh to one Jameela Khaleel. It also made Rs 22.25-lakh interest waiver to one Sadat Ali and Rs 3.02 lakh to one Mozammjan,’’ the report stated.

Besides, the RBI unearthed certain violations while sanctioning loans to various trusts and organisations. ‘‘The Al-Ameen Education and Charitable Trust and allied institutions owe the bank Rs 34.75 crore, for which property was not secured,’’ it noted.

Documents available with The Indian Express show that such loans were sanctioned by the Bank to balance the accounts of Al-Ameen Islamic Benefit Fund Limited in the names of companies like Elsoft Systems, Shreya Infotec and Radha Hi-Tech among others. Strangely, registered posts sent to these companies returned with the ‘addressees-not-found’ tag. However, Khan said the bank had decided to recover all loans that had been waived.

The RBI also said the Bank had functioned ‘partially as a bank to big builders’ and pointed out that it had accepted the surety of one of its own partners while sanctioning loans. In all, quite a harsh indictment of a bank that was started mainly to serve the weaker section of society. The bank has also been consistently paying its investors dividend, right from inception. And that’s what makes the nightmare all the more scary.