In one of the biggest scams in India’s banking history, government-owned Central Bank of India has admitted a Rs 127-crore fraud. This expose comes as a big blow to the image of the country’s banking industry, which has been largely well regulated so far.
RBI and the CBI have launched separate probes into the alleged financial bungling, HT has learnt. “Central Bank of India has reported a fraud involving an amount of Rs 121 crore. They have stated that they have suspended two of their officials from the bank and are further examining the staff accountability aspects in the case,” the RBI said in a written response.
Bank officials confirmed the alleged fraud was committed between December 2007 and March 2008. Two Kolkata based firms — Rajco Steel Enterprises and Kali International Private Limited which maintained accounts in the Burra Bazar branch, withdrew amounts of Rs 65 crore and Rs 62 crore respectively though their combined credit limit was not more than Rs 20 crore.
Officials conceded that in a cover up bid, the zonal office continued to report to the bank headquarters that all was well.
In July 2008, the bank headquarters in Mumbai asked the zonal office to close the accounts of these two firms, as “their conduct was not satisfactory.” Surprisingly, neither the branch nor the Kolkata zonal office took any action barring the fact that the latter promised to review the credit limit of these companies, which was also not done.
India Rejuvenation Initiative, an organisation fighting against corruption and headed by former Chief Justice of India RC Lahoti, has in a letter to the CVC Pratyush Sinha, demanded action against top bank officials.
“According to officials of the Central Bank of India, there are many instances of wrong doings but they are afraid to come forward due to fear of their names being exposed,” the letter said. HT has learnt that barring an assistant general manager and a senior manager, no other official has been taken to task.
When contacted, Ramesh Gupta, promoter of Rajco Steel said that the two companies owned by a single family had not violated any norm.