As Kingfisher default issue flares up, CBI chief makes all the right noises; will he walk the talk?

By Nalini R Mohanty

CBI director, Anil Sinha, hogged the limelight last week for his no-holds-barred chastisement to the heads of the public sector banks for their laid-back approach in taking to task the large borrowers.


Anil Sinha, CBI director

In the inaugural session of the 7th conference of the CBI and Indian Bank Association on 2 March at Mumbai, Sinha minced no words to put the top officials of the public sector banks in the dock for humongous loss of the taxpayer’s money.

The head of the top investigative agency of the country talking down to the chairmen and managing directors of the public sectors banks present there as the colluders in the financial bungling of gargantuan proportions must be unprecedented.

The CBI boss began his indictment with an overview of the dismal banking scenario in India: “During the last six years, gross NPAs in PSBs have gone up from Rs 44,957 crores into 2009 to Rs 3 lakhs crores in 2015 (sic)."

He went on to say: “The level of gross NPAs as percentage of gross advances has also gone up from 2% in 2009 to 4.36% in 2015. And we are not even considering huge amounts tied up in accounts under restructuring”.

Sinha then came to the crux of the matter: “There is also a rise in quantum of high value frauds in borrower accounts, especially those pertaining to periods from 2008 to 2012. There is also rising trend in case of bank frauds and financial crimes taken up by the CBI. CBI investigated 171 cases of bank frauds in the year 2015 involving funds of Rs 20,646 crores.”

By his own account, the total value of the 171 cases that the CBI investigated last year is less than 5% of the total stressed loans that is as good as lost. But bank officials are not losing sleep over the matter; they are content by handing over the cases of relatively smaller borrowers to the CBI.

Anil Sinha hit the bull’s eye when he said: “the crisis in the banking and financial system runs deep and there is a growing sense of anguish among the public that while banks are strict on retail borrowers, the big borrowers and large-scale fraudsters are able to not only evade the law but enjoy the fruits of crime.’

The CBI chief put the onus of such a mess squarely on the banks: “Something is seriously wrong... a significant part of the defaults are wilful and fraudulent. What causes greater concern is that a major part of the NPAs and frauds are in large value accounts. Added to this is the unduly slow and long process by which such loans and advances are red-flagged, declared NPAs, then as wilful defaulters and finally as fraudulent. The whole process is so time consuming that it allows such large borrowers ample time to walk away with the funds. A large part of such funds move outside the country to tax havens through hawala and other unofficial channels. As a result of these limitations, investigations by CBI are grossly hampered”.

CBI head cited a concrete example: “CBI has recently registered a case of cheating and fraud against Kingfisher and its erstwhile management involving allegations of defrauding banks to the tune of nearly Rs 7000 crores. This case was registered in July 2015, but the loans/ advances were taken during 2004 to 2012. However, despite our repeated requests, the banks did not file a complaint with the CBI. We had to register the case on our own initiative.”

The CBI boss touched the raw nerve when he said: “The accountability mechanism in banks and financial institutions are weak and diffused. In the end, no one seems accountable. The message to the public is that rich and powerful are able to avoid consequences of cheating and fraud, while the ordinary citizens are promptly booked. This undermines faith of people in rule of law which has dangerous consequences in democracy.”

Sinha concluded by saying that the challenge was to ‘fix the fraudsters and public officials who collude with such cheats.’

Strong words. But then it is futile to expect the colluding bank officials to step up efforts to expose and book the defaulters. They would rather do their best to keep their underhand dealings under wraps for as long as possible. It will be left to the CBI to proactively pursue such cases of fraud in the larger interest of the poor taxpayers of the country.

Will the CBI do it? The CBI chief talked about his organisation’s own initiative in the case of Kingfisher. But there are much larger cases of bad loans. CBI had, on its own initiative, exposed the sinister deal between the then chairman of the Syndicate Bank, S K Jain, and the vice president of Bhushan Steel, Neeraj Singhal, in 2014.

Singhal had allegedly paid Rs 50 lakh to Jain as the latter had entered into an agreement to roll over the Rs 100 crore loan that Singhal’s company had taken from the bank but had defaulted on repayment. Both were arrested, but they were out on bail in two months as the CBI failed to submit the charge sheet. It has filed the charge sheet a year later, last October, and the outcome is awaited.

Imagine the scenario: if the official of the Bhushan Steel paid Rs 50 lakh to the CMD of a bank who had lent Rs 100 crore, how much this troubled company must have paid to the top officials of other banks which have advanced thousands of crores?

Mind you, Bhushan Steel has a loan account of more than 35000 crore from public sector banks; its market capitalisation (not to talk of collateral) is not even worth Rs 3,500 crore. Still the bankrupt steel company got large dollops of money from the nationalised banks when the UPA government was in power.

During the current NDA regime, instead of declaring the loan as NPA, Bhushan Steel managed to restructure its loan and got fresh infusion of capital from the public sector banks.

Will the CBI chief walk the talk and unravel the sinister nexus between top bank officials and promoters of Bhushan Steel – all the lies, cheating and multi-faceted corruption that went into it?

If CBI could act proactively in a case involving Rs 7,000 crore of default (Vijay Mallya and Kingfisher) under his stewardship, Anil Sinha owes it to the nation to expose the shenanigans of much larger deals involving 20 other big defaulters; he would go down history as a great crusader for public cause if he and his team ensure that all the colluders are brought to justice.

Updated Date: Mar 08, 2016 17:20 PM

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