High-level graft detected in oldest pvt bank

Huge loans and working capital limits have been granted to companies that existed only in imagination; proceeds of term loans have been allowed to be drawn through pay orders favouring dealers who existed only in bank pass books; and records have been otherwise doctored to give away crores. The list goes on and on, while the bank’s Non Performing Assets (NPA) and bad debts keep climbing.

Some of these charges have been confirmed by the bank’s own internal inquiry headed by an Assistant General Manager (AGM). Some more have yet to be gone through with a fine toothcomb.

But what gives it all an ominous twist, is the role of its own top brass.

There is the curious case of one of its top officials, at its head office here, who got his son admitted for MBA through a private institution at Coimbatore this year. He paid Rs 2 lakh for it. But the money came from a man who has been milking the bank, and getting away with it too, thanks to its own obliging officials.

This man had wangled a variety of hefty loans from the bank in his own and his wife’s names; many with no collateral security or other hassles. One, for instance, was for an imaginary textile unit run by his wife.

The AGM-led probe had found that he figured even in the bank’s advances to a firm with which he had “no apparent connection”; besides being a “common factor in some other loan transactions as well”.

The bank had advanced a term loan of Rs 1.52 crore and a Cash Credit facility of Rs 2 crore to the firm in question. When repayment did not happen, it found that much of what had been offered as security existed only in the loan application.

This man purchased a pay order for Rs 2 lakh from the bank’s Coimbatore branch, favouring the institute where the top official’s son sought admission. (The institute has since admitted in writing to the bank that the pay order No 49044 of 13/4/99 was submitted by the top official himself, and has been duly encashed.)

That was not all. The bank’s probe found that 14 other pay orders too had been issued on the same date by the same bank branch. “(But) all the credit slips (of) the pay orders of that day are missing, though the slips of all other transactions are intact. We could not get any convincing explanation for the missing slips.” the probe report said.

The final probe report categorically mentioned the MBA admission of the top official’s son, and pleaded to the management for a further probe “in the best interests of our institution”.

When contacted, the bank chairman, A R Moorthy, claimed to this newspaper that a probe was indeed going on. In other words, no action has been taken yet, almost seven months after the AGM’s report was submitted.

The worried Nedungadi Bank Staff Federation petitioned to the chairman personally last week, protesting “the inertia in curbing growing corruption”. It urged him to punish officials helping to “siphon off bank funds, in collusion with unscrupulous borrowers and middlemen” and demanded an in-depth probe into charges against top officials.

“We are at a loss to understand why the management keeps a stone-like silence, when there are clear documentary and other evidences.” Top officials, it said, have been deliberately flouting rules and regulations and causing loss to the bank. There have been “deliberate swindling of the bank’s money”, the Federation asserted in its note to members.

Anyway, if the findings of the probe covering just its Coimbatore branch is anything to go by, the bank has reason to worry. The NPA in just that branch is estimated to be about Rs 12 crore, against about Rs 30 crore of advances. A good part of it might need to be written off.

Overall, the bank’s NPA had nearly doubled from just above 6 per cent three years ago, to 12.23 per cent now. The spurt has been more significant of late: From Rs 93.25 crore in March this year, the NPA bloated to over Rs 100 crore by end-June.