Dhanlaxmi Bank Union allege fraud, demand merger with PSU banks

Just days after Dhanlaxmi Bank’s CEO Amitabh Chaturvedi put in his papers because of differences with the board, the All India Bank Employees Association (AIBEA) claims that the bank’s business has actually fallen by around Rs 22,000 crore but is being camouflaged through inter-bank deposits and other window-dressing measures, reports moneylife.

That bank’s management and the union have been at loggerheads over its asset quality and allegations that the bank was “fudging its accounts” to show “inflated” profits since last September.

[caption id=“attachment_208589” align=“alignleft” width=“380” caption=“Employee Union of Dhanlaxmi Bank have asked for a merger of the bank with a public sector bank as they fear the numbers of the bank are fudged.”]  [/caption]

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The allegations prompted the Reserve Bank of India to inspect the bank’s books in November and issue a plan of action that directed the bank to moderate its loan growth and improve its cost-efficiency ratio, reported Firstpost earlier.

Rumours have been doing the round that the bank is financially stressed and may report losses of around Rs 30 crore. But the Union fears that the bank may not apart from the bank not reporting any profit this quarter, some if its customers have actually withdrawn their deposits from the bank. The Union also alleges that “who resigned as MD has withdrawn his family deposit of around Rs 5 crore from the Bank.”

Moreover, this fear of fudged numbers has led the unions to demand the merger of the bank with another public sector undertaking.

Following the news, the banks stock spurted 18 percent and closed at Rs 68.

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Speculation has been rife that the South Indian Bank or Federal Bank would acquire this bank. However, the bank later scotched all rumours saying that they on the contrary, would like to acquire any bank at a reasonable price.

Moreover, Dhanlaxmi Bank’s loan book quality has raised several eyebrows in the industry. “The rapid growth in credit off-take has resulted in significant increase in the share of unseasoned loans to the total advances. This does not represent clear picture on long term asset quality,” said Saswata Guha, associate director (banking), Fitch Ratings in an interview with Moneycontrol.