Money & Banking

Arrest of Bank of Maharashtra officials unwarranted: IBA

Our Bureau Mumbai | Updated on June 22, 2018

Claims authorities misused MPID Act; seeks formation of committee to get clearance for criminal proceedings against top-level bankers



Terming the arrest of top Bank of Maharashtra (BoM) officials as ‘unwarranted’, the Indian Banks’ Association (IBA), on Friday, said it will present a memorandum to the highest government functionaries next week to seek, among others, formation of an independent committee that will give clearance for initiating criminal proceedings against senior executives of banks and for directions to prevent recurrences of such incidents.

According to VG Kannan, Chief Executive (CE), IBA, all bankers unanimously expressed anguish and concern over the arrest of the BoM officials for bonafide decisions taken in the discharge of official duties. Senior officials of the bank have been arrested for criminal conspiracy and in violation of the Maharashtra Protection of Interest of Depositors in Financial Establishment Act, 1999.

DSK Developers

Underscoring that the Act is not applicable to banks, Kannan explained the banker is not concerned with the activity of taking and repayment of deposits by the company (DSK Developers in the case of Bank of Maharashtra). Hence, the arrest (of the MD & CEO and ED) is unwarranted.

At the meeting, bankers were of the view that credit is very critical for the growth and development of the economy and that they are very much committed to it.

“An environment conducive to growth needs to be ensured and maintained by the government, whereby the decision-making process in banks is not adversely affected. Concern was also expressed that simultaneous investigations by different authorities, reviewing the same decision of bankers, has resulted in adversely affecting the regular banking operations of bankers,” said Kannan.

The bankers also felt that officials under investigation for decisions taken in discharge of duties should be provided with legal assistance while in service or thereafter. Banks also decided to determine the possibility of obtaining insurance cover to take care of costs incurred in defending themselves.

Banks also proposed to suggest to the government that an independent committee, probably with a central bank senior representative, be formed to individually give clearance for initiating criminal proceedings against senior executives of banks, so that the smooth functioning of the banking industry is ensured.

“In the meeting, it was also discussed that as per the RBI guidelines, frauds involving amounts exceeding ₹25 crore are to be handled only by the CBI. And assuming that there is a fraud in the case, we are unable to understand how the matter has been taken by the State police,” said Kannan.

BoM had sanctioned ₹100 crore to DSK Developers and released 16 per cent of their share pending release of the consortium limits. The total limit for the particular project was ₹600 crore. Of this, BoM’s share was ₹100 crore. In addition, BoM had sanctioned a short-term loan of ₹10 crore. This was sanctioned to the company against specific property of ₹15 crore.

Kannan also observed that the allegation that the disbursement of ₹10 crore in breach of violation of guidelines and directions given by the RBI is incorrect in as much as due process was followed and the loan was fully secured.

Published on June 22, 2018

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