Public sector bank appointments to be under CVC vigilance-Business today

The Central Vigilance Commission (CVC) has red-flagged appointment process of several senior officers in public sector banks undertaken during the fag end of the United Progressive Alliance (UPA) regime.

According to sources, the CVC has held back the vigilance clearance given to some of the names shortlisted for appointments due to alleged anomalies in the selection process.

The development comes at a time when the new government is relooking at some of the names recommended for senior posts in the public sector by the UPA government.

The CVC has in a letter written to the finance ministry has also cited recent media reports about alleged irregularities in top level appointments in public sector banks.

The CVC has prima facie claimed to have found instances where more marks were given to some of the candidates in their interviews allegedly without any basis to secure their entry into the banks, sources added.

The Reserve Bank of India governor is the head of the Board that selects chiefs of public sector banks. The appointments committee of Cabinet approves Board-level appointments in the public sector undertakings, including nationalised banks.

Following the investigation into the Syndicate Bank bribes-for-loan scam, the Central Bureau of Investigation (CBI) had sent an advisory to the finance ministry stating that appointments of some public sector bank chiefs did not appear to be above board.

The CBI had pointed out that Syndicate Bank chairman and managing director S.K. Jain, arrested in the scam, had made it to the top job despite poor ratings in his annual confidential reports. According to sources, the CBI has suggested legal scrutiny after it found evidence to suggest that ACRs and interviews were managed and some middlemen also allegedly played a role.

Jain was arrested by the CBI for allegedly receiving Rs 50-lakh bribe to enhance credit limits of Bhushan Steel and Prakash Industries and later investigations showed that the cash trail in the bribes was around Rs 3.5 crore.

Tough to track AT money: CBI-Times of India
BHUBANESWAR: Tracing AT Group's money trail is becoming a tough nut to crack for the CBI, even as company CMD Pradeep Sethy's 10-day remand ends on Wednesday.

What stunned the CBI is that the company has diverted money to more than 300 bank accounts. "It will take a lot of time to establish the trail and diversion channels. Financial experts have been roped in for the job," said a CBI officer.

"Sethy floated eight companies. The money, collected from the public, was circulated in different accounts of these companies. Prima facie, more than Rs 50 crore was diverted," the officer said.

Bhubaneswar police, which was earlier entrusted with the task of probing the Rs 500-crore AT Group scam, failed to establish the money trail due to lack of expertise. "We dropped our probe into the company's financial part for lack of skilled manpower. Though the state government provided us a chartered accountant, he too struggled with the job," a senior police officer said. Police had just frozen Rs 2.17 crore bank accounts of AT Group.

On Tuesday, AT Group's former director Jyotiprakash Joyprakash was sent to judicial custody after his six-day remand ended.

The CBI plans to extend Sethy's remand. There were rumours that Sethy felt giddy during interrogation by the CBI and taken to a private hospital. But the CBI officials have denied it.

They said the probe is a tightrope walk for them because of Sethy's alleged nexus with politicians. "Though Sethy mentioned names of some officials to whom he had given financial benefits, we are examining the charges. He also named a leading private coaching centre that took more than Rs 15 lakh loan from him but did not return it," the officer said.

Last week, CBI's joint director Rajeev Singh grilled Sethy and asked his officers to mount surveillance on politicians, whose names were in circulation in the scam.

CVC refuses to give vigilance nod to top public sector banks appointments-Times of India
NEW DELHI: The Central Vigilance Commission has refused to grant vigilance clearance to the latest list of those recommended to the post of executive directors in public sector banks, until the government clarifies its position on the names.

Sources said the CVC has asked the government to clarify if it endorses the latest list of candidates. The move comes on the back of concerns about irregularities in top level appointments to PSU banks after the Syndicate Bank scandal.

The ED appointments have seen 'back and forth' communication between CVC and the banks, and now the entire process has been escalated to the ministry level.

The CVC has written to the department of financial services- the administrative ministry for PSU banks — asking it to clarify about its stand on the selection of new EDs. The CVC has cited newspaper reports that said the finance ministry has decided to take a relook at the recent appointments of senior level PSU executives.

Finance minister Arun Jaitley had recently written to cabinet secretary Ajith Seth and RBI governor Raghuram Rajan, asking them to review the recent appointments. While RBI governor is the head of the appointment board that selects chiefs for state-run banks, the cabinet secretary processes the papers for the appointments committee of the cabinet.

The finance minister is believed to have asked them to look at some of appointments processed during UPA's last weeks that appeared to be lacking transparency.

Jaitley's letter was prompted by CBI findings in its investigation into the Syndicate Bank loan scandal, in which it arrested bank's CMD SK Jain, Bhushan Steel's vice chairman Neeraj Singal and some others.

CBI chief Ranjit Sinha told the finance ministry that the agency has noted irregularities in senior level appointments during the investigations. CBI had suggested a scrutiny of senior level appointments since it had stumbled upon evidence, indicating that ACRs and interviews were manipulated in some cases. The CBI also suspects that some middlemen may be involved in such manipulations.

The candidates are selected on the basis of marks totalled from both confidential reports (ACRs) and interviews. It is suspected that both the marks were "dramatically altered" to favour certain candidates.

More banks may be without chiefs if the government does not speeds up the selection process-ET

MUMBAI: At least half a dozen state-owned banks, which account for about a fifth of the industry, will be without chiefs by the end of September, potentially hurting their growth prospects and restricting their ability to take advantage of an economic recovery if the government does not hurry the selection process.

Four have been headless for more than a month - Bank of Baroda, Indian Overseas Bank, Syndicate Bank and United Bank of India don't have a chairman and managing director (CMD).
They will be joined by Oriental Bank of Commerce and Canara Bank by September-end with their CMDs set to retire. "The first casualty is decision making," said BA Prabhakar, former chairman and managing director of Andhra Bank, who spent more than three decades in state-owned banks.

"It is not just lending, but policy decisions and new initiatives suffer. The bottom line is bound to suffer. The impact will not be felt immediately, but will show up over a period of time." Appointments have slowed since the government has become cautious with questions about lending practices of some banks.

United Bank of India head Archana Bhargava quit after the bank reported record high losses and a jump in bad loans although she was instrumental in bringing these to light.
Syndicate Bank chairman SK Jain has been arrested by the Central Bureau of Investigation over allegations related to bribes in exchange of the enhancement of credit limits. The Bank of Baroda CMD post fell vacant last month after SS Mundra was posted to the Reserve Bank of India as deputy governor while the term of M Narendra, chief of Indian Overseas Bank, ended in July after he reached the age of superannuation.

Typically, in a public sector bank, when a new CMD is not appointed at the time of the incumbent's exit, the finance ministry delegates those powers to the executive directors.
"Ideally, a bank should have a CMD without any gap. Day-to-day running of the bank will happen, but without a CMD, the entire direction and momentum is lost," said RK Bakshi, former executive director of Bank of Baroda.

"A CMD is appointed with the mandate to give vision and a directional push to the bank." SL Bansal of Oriental Bank of Commerce and RK Dubey of Canara Bank are due to retire in September.

Apart from this, the executive director's post is vacant in banks such as Andhra Bank, Union Bank of India and UCO Bank. A senior finance ministry official who did not want to be identified said the delay is because the government is reviewing the appointment procedure at state-owned banks after the Syndicate Bank episode.
But the United Bank chief left in February while the Syndicate Bank episode occurred last month. The selection process for UBI was completed by April 2014, but the results are yet to be announced


No relief for Kingfisher Airlines, SC doesn't restrain Union Bank from declaring it a wilful defaulter

New Delhi: In a setback for the Kingfisher Airlines, the Supreme Court on Tuesday refused to restrain the Union Bank of India from declaring it a wilful defaulter. "Now that you have been declared a defaulter, you can challenge it in any court," the SC said.

The KFA had approached the SC saying that Union Bank of India be restrained from declaring KFA a wilful offender. The Bank had on Monday declared debt-ridden Kingfisher Airlines and its promoter Vijay Mallya as wilful defaulters.

"We have declared Vijay Mallya and three other directors of Kingfisher Airlines as wilful defaulters," United Bank of India Executive Director Deepak Narang had said.

The Grievance Redressal Committee (GRC) of the bank has declared directors Ravi Nedungadi, Anil Kumar Ganguly and Subash Gupte as wilful defaulters.

Post this declaration, these persons and the entity would not be able to borrow from the bank in future. They would also lose Director-level positions in companies. Criminal proceeding could also be initiated against these persons if warranted.

The GRC meeting was convened on Monday after a Calcutta High Court division bench allowed the bank to initiate the process of declaring them as wilful defaulters last week. The GRC had asked directors to be present before it but no one turned up.

Instead, they had sent a letter through their lawyer stating that they had filed a Public Interest Litigation (PIL) in Supreme Court and pending the judgement

the bank should not proceed in this regard.

The Kolkata-based bank is the first PSU lender to initiate the process of declaring Vijay Mallya and three other directors of the grounded Kingfisher Airlines as wilful defaulters a couple of months ago.

Subsequently, other banks such as State Bank of India, IDBI Bank and Punjab National Bank have also initiated the process of declaring KFA and its directors as wilful defaulters.

The bank's exposure to Kingfisher Airlines was around Rs 350 crore as part of consortium led by State Bank of India. The consortium of 17 banks, has an outstanding debt of about Rs 4,022 crore from the now-grounded carrier and outside the consortium, the bank gave about Rs 60 crore loan for Pre-Delivery payment.

Post this declaration, these persons and the entity would not be able to borrow from the bank in future. They would also lose Director-level positions in companies. Criminal proceeding could also be initiated against these persons if warranted.

No relief to Kingfisher Airlines, SC tells them to challenge order of being declared a wilful offender in any court SC gives no relief to Kingfisher Airlines, doesn't restrain Union Bank from declaring them wilful defaulter

SBI to approach CBI against Kingfisher over loan default

After being declared wilful defaulter by United Bank of India, liquor baron Vijay Mallya faces more trouble.
The State Bank of India (SBI) may also soon approach the Central Bureau of Investigation (CBI) for investigating the alleged criminality involved in default of Rs 6,500 crore loan given to it by an SBI-led consortium, according to government officials.
The government is also mulling the bank consortium taking over the management of Kingfisher Airlines.

The government is also rolling up its sleeves to ensure that Mallya is ostracised from the country's financial system and will see to it that no bank grants any loan to Vijay Mallya and all the companies where he is a director.
The companies which have other promoter group members of Kingfisher Airlines on their board will also not be given any further loans.

A senior official said, "The tendency to open accounts in banks which are not part of the consortium has to be curbed. Kingfisher Airlines opened an account in a private bank, which had a balance of Rs 7.5 crore. The revenue from operations was being deposited in that account. If the company had money in another account, where is the question of inability to pay? Is it not a wilful default?"
Ministry of Finance will also approach the Reserve Bank of India (RBI) to address the issue of corporates resorting to opening of current account in a different bank, and depositing revenue from operations in it, rather than in the bank from where they have taken loans. The ministry has unearthed several such instances.

A source in the finance ministry confirmed that SBI is preparing to approach the investigating agency, without pegging a deadline to it, especially after the bank is now armed with a forensic audit on the Kingfisher Airlines account conducted by independent auditor EY.
The audit found instances of diversion of funds by Kingfisher Airlines. SBI in its response to queries from dna, said, "The audit report is being examined by the consortium of banks, all appropriate actions are being initiated."

The government is considering an option of the bank consortium taking over the management of the Kingfisher Airlines. "The two options before us are sale of assets of the company or taking over the management of the company. The second option is more preferable as the first one involves intricate issues such as labour, valuation, etc. Also, the chances of the recovery are better in this option," said the official.
I have no doubt that Action Against Mallya, promoter Of Kingfisher Will Shake all crorepati and Arabpati Defaulters of banks. This will send shocking and alerting message to all defaulters of banks who are though rich and capable to repay the dues but wilfully avoiding repayment of bank loan. I hope this is a good message for bankers .Habit of borrowers of treating bank loan as charity and treating bank case against defaulters as safety will now stop. All bankers will feel relaxed to some extent if person like Mallya is booked to task and money is recovered.

Clamp down on Mallya is just the beginning: More Kingfishers will fly out of the nest-Firstbiz

The harsh steps banks have taken to get their money back from Vijay Mallya-owned, now defunct Kingfisher Airlines was something waiting to happen. With an estimated Rs 7,000 crore exposure, Kingfisher is arguably the largest case of bad loans for Indian banks, at this point.

There have been several rounds of negotiations banks conducted with the grounded airline’s ill-fated emperor in the last few years to work out a possible solution to the Kingfisher mess, none of which worked out.

The decision of Kolkata-based United Bank of India (UBI) to tag Mallya as a wilful defaulter is the harshest step a bank can take upon any borrower, since it virtually ostracises the company and its promoters from the financial system and even disqualifies the promoters from holding executive role in any other firms.

The matter doesn’t end there. Following UBI, other lenders, including State Bank of India (SBI) are planning similar steps, including levelling charges of criminality against Mallya, seeking the intervention of investigating agencies in the case.

Beyond Mallya and Kingfisher, the banks’ action on Kingfisher has major significance in the banking system since it could encourage banks to seek similar recourse to recover money from other companies, where their money is at stake.

That will be particularly so, when there is immense pressure on state-run banks (which control 70 percent of assets in the banking system) to cut the bad debt.

In the face of recurring cases of bribe-for-loan scams, it has become clear that criminality is indeed a major reason for the current pile of stressed loans.

There are several other cases, where criminality can be cited as a reason for stress.
Winsome Diamonds is one such, where the CBI has begun a probe to the working of the company after it allegedly defaulted Rs 6,500 crore worth of loans to a host of banks, making it equal in size to Kingfisher. The company claims that the default has occurred following non-payment of dues by its trading partners in the Middle East. But the banks haven’t bought that excuse and have slapped legal notices against the firm.

Another one is that of Deccan Chronicle Holdings Ltd (DCHL), where the CBI is investigating alleged cheating and fraud. According to some of the bankers to DCHL, part of the reason the company faced the crisis was diversions of funds to expansion plans of the group, which was not stated to the lenders at the time of taking the loan.

Another major case banks will have to deal with, the fate of which is still uncertain, is that of Bhushan Steel, which has about Rs 40,000 crore loan to some 51 banks.

The firm is facing a crisis after its vice chairman Neeraj Singhal was arrested on serious charges of bribery in the Syndicate Bank loan scam. Singhal allegedly bribed Jain to seek undeserving credit facilities from the bank that kept its loans standard.

Even though the loan is at present standard, bankers fear that any possible slippages in the loan can have huge impact on the banks in the consortium.

But beyond Bhushan, one other critical factor linked to the Syndicate Bank scam is the role of middleman Pawan Bansal and his firm Altius Finserv Private Limited, which will have much wider implications for banks.

Besides Syndicate, his firm has facilitated loans to other firms as well, which are being investigated by CBI sleuths. According to a report in the DNA, the CBI has recovered documents to prove that Bansal has facilitated loans from UCO Bank to Era Infra (Rs 600 crore), Tayal Group (Rs 500 crore) and Arshiya International (Rs 1,300 crore).

That apart, Bansal has also facilitated loans from Bank of Maharashtra to these firms. This include Rs 200 crore to Era Infra, Rs 400 crore to SEL Manufacturing and Rs 200 crore to Shiv Vani Group.
Now, take a closer look at these cases. Almost, all these loans are under the stressed category in the books of banks and have been moved to the corporate debt restructuring (CDR). Some of these cases have been approved by banks for recasts and the process has already begun.

By definition, CDR is a facility, where banks relax the loan repayment terms for companies, which face genuine stress. This is done through reduction in interest rates, elongation of repayment terms and offering a moratorium.

If these loans originated through bribes, there is a possibility that, in the first place, these firms didn’t deserve the bank funding through genuine channels. Not surprising that all these loans have turned stress and is under restructuring. Banks need to take a look on whether these cases deserved loan recasts.

In the case of Tayal group, the group was in the news in connection with the erstwhile Bank of Rajasthan case. According to Securities and Exchange Board of India, Tayals, promoters of the bank, fraudulently hiked their shareholding in the bank through a series of off market transactions. Again, the middleman worked to get the deal done.

Indian banks are already reeling under the pain of stressed assets. The amount of bad debt of 40-listed banks in the country stood at Rs 2.5 lakh crore in the banking system as of end June.
Among the banks with high level of gross non-performing assets (NPAs) are United Bank of India (10.49 percent), Central Bank of India (6.15 percent), Andhra Bank (5.98 percent) and Indian Overseas Bank (5.84 percent).

Besides the bad loans, a huge chunk of loans are being restructured, which is estimated to be between Rs 5 lakh crore to Rs 6 lakh crore. A sizeable chunk of such loans could turn bad too in the absence of significant economic revival.

Banking system is the backbone and a proxy to the economy, hence damages caused to it can have serious ramifications on the overall economic stability as well.
If the banking system is determined to find the actual root causes of the bad debt pile and tackle criminality with iron hands, a significant portion of the problems associated with bad loans can be resolved effectively.

Many more Kingfishers will fly out of the nest then.

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