Season of Scam

THE SWADESHI movement inspired the establishment of the two oldest banks in India —but ironically, both institutions have been laid low by allegations of fraud against top employees. Last month, a CBI court in Mumbai finally sentenced M Gopalakrishna, former chairman of Indian Bank to 14 years in jail for favouring two Mumbai-based private companies by misrepresenting facts and causing losses of over Rs 10 crore to the bank. Central Bank is still awaiting a decision on the cases filed against its former chairman and managing director, HA Daruwala.

Daruwala’s record, before taking over at Central Bank in July 2005, was hardly spotless: she had been accused of nepotism as executive director of the Oriental Bank of Commerce. After she joined Central Bank, the bank continued to finance M/s Kali International in Kolkata, allegedly at her behest. Kali International ended up overdrawing Rs 125 crore from the bank. Though she was informed about the loans by the operational staff, they were instructed to continue to finance the company. Similarly, she instructed staff in Mumbai to sanction a loan of Rs 12 crore to M/s Technochem in April 2008, the recovery of which is still uncertain.

During her charge, the bank also violated SEBI guidelines by not disclosing all its strengths and weaknesses in an IPO in 2007. Facts like the bank’s share in the industry going down from 4.7 percent to 3.1 percent, and the treasury income remaining zero were kept away from investors.

Trade union leaders also allege that she took bulk deposits worth Rs 27,000 crore as window-dressing at a rate of interest of 12 percent throughout her tenure when the bank had surplus funds. This money was loaned to big corporate houses at 8.5 to 9 percent interest.

Daruwala also introduced new policies verbally, which included a reduction of joining leave after transfers from seven to four days. She is alleged to have forced bank borrowers to contribute Rs 5 lakh each for repairing the building of the Parsi Girls School, of which she is an alumnus.

When employees raised these issues, she dismissed several officers. While five were reinstated by the new CMD, the rest are struggling in court. One of them, Abhijit Ghosh, a General Manager, raised issues under the Whistelblower’s Act and provided the Central Vigilance Commission (CVC) with documents about irregularities. But his name was compromised at a ministry of finance meeting in April 2008. After she learnt of the charges, Daruwala is said to have threatened action: on September 24, 2008, after being slapped with three cases of fraud, Ghosh was suspended. “Daruwala tortured us for three and a half years,” says trade union leader SK Dasgupta, adding, “The new CMD gave us justice in just 42 days.”

The CVC has, however, denied all charges against Daruwala and the case is now being investigated by the CBI. It may not be a coincidence that CVC member Ranjana Kumar, who looks after the banking division, is a close friend of Daruwala.

Apart from everything else she seems to have cost the bank, it has also spent Rs 24 lakh to defend Daruwala. One wonders what markers the former CEO is calling in. The silver lining: nine days after her retirement on December 31, 2008, she was nominated the deputy governor of the RBI. A pity no one looked at her track record with India’s oldest bank.
From Tehelka Magazine, Vol 6, Issue 22, Dated Jun 06, 2009