Four days after the CBI registered cases against a Kolkata- based company, it has emerged the RBI redflagged loans given to the firm seven months ago, virtually indicting banks for not acting in one of India’s largest banking frauds.
In a confidential letter to the department of financial services (DFS), the Reserve Bank of India raised uncomfortable questions about the role of banks that had lent a colossal Rs 5,253 crore to REI Agro Limited case. The Basmati rice trading firm availed the credit from a consortium of 21 banks.
RBI’s letter came after already asking the lending banks in July 2014 to investigate REI Agro Limited’s operations and report back any fraudulent activities. When the banks didn’t respond, the central bank asked UCO Bank — the largest lender — to hold an emergency meeting of the lending banks, and asked them “to report the fraud and start recovery proceedings immediately”.
The Central Bureau of Investigation lodged a case of criminal conspiracy, cheating and forgery against the firm on Monday.
“Instead of exploring the possibility of treating the case as a fraud and filing a criminal complaint if necessary, the banks were moving in the direction of restructuring the loan,” read the RBI letter to the DFS, the government arm that oversees banks and banking operations.
But the banks didn’t take action for a long time.
The RBI letter also asked the DFS to alert the CBI, Enforcement Directorate and the Serious Fraud Investigation Office (SFIO) to take necessary steps.
The RBI spokesperson refused to comment while calls to the DFS secretary elicited no response. REI Agro could also not be contacted.
“Our bank has reported REI Agro account as default and fraud... recovery action has also been taken,” said SR Bansal, Corporation Bank chief.
But an Axis Bank spokesperson said the bank does not comment on “individual clients and their transactions”. Bank of Baroda executive director BB Joshi did not respond.
A senior official at one of the public banks said the consortium was trying to revive the loan amount to keep it active and not classify it as a non-performing asset, which does not fetch returns.
HT had earlier reported on RBI governor Raghuram Rajan’s letter to the PMO, listing out India’s top 10 bank frauds — led by a Rs 4,276 crore loan by diamond trading firm Winsome — asking the officials to act urgently on the large value banking frauds and “the need to take concerted action in these cases”.