The curious case of Nabard boss who ignored clear conflicts of interest

Prakash Bakshi, a former chairman of the National Bank for Agriculture and Rural Development (Nabard), who faces charges of financial impropriety and giving unusual preference for financing rich corporates over poor farmers, has curiously gone an extra mile to establish his guilt. Bakshi has joined Shree Shubham Logistics Ltd (SSLL) as its managing director. SSLL, which is a subsidiary of the over Rs 6,000 crore Kalpataru Group (including Kalpataru Power Transmission), was one of the biggest beneficiaries of irregular soft loans and interest subsidies during his tenure as the Nabard chairman from June 2011 to September 2013. Bakshi was served a charge-sheet by the government on 30 September 2013 - his last day of service - for misappropriation and misuse of his official position. [caption id=“attachment_2421306” align=“alignleft” width=“380”]  Former Nabard chairman Prakash Bakshi. Image courtesy Cafral[/caption] Though sources confirm that Bakshi had attended a meeting in Nabard as SSLLs representative soon after his retirement in 2014 itself, there has been no official disclosure of his employment until recently on the SSLL website. However, an article of 14 March 2014 said Dr Bakshi had already been appointed MD of SSLL, quoting sources privy to the development. This undeclared association could also be because a retired Central Service Group A official is not allowed to accept private, commercial employment before the expiry of two years from the date of his retirement without a sanction from the President. The Department of Financial Services (DFS), in response to information sought under the RTI Act, confirmed on 22 September 2014, that Bakshi had sought, but was denied permission, to take up short-term consulting assignments with multilateral and bilateral agencies, Zydx Industries and Kalpataru Power Transmission Ltd. Government service rules are clear that any approvals for commercial employment are conditional upon the official not having any official dealings with the prospective employers in the preceding five years; there should be no conflict of interest between the policies of the office(s) he had held in the last five years and the interest represented or work undertaken by the organisation he proposes to join; he should have had a clean service record, particularly with respect to integrity and dealings with government as well as with central public sector enterprises (CPSEs)/non-government organisations; the applicants commercial duties should not involve liaison or contact with government departments/PSEs; and the employer of the applicant should not get an unfair advantage due to previous official positions/experience/knowledge of the incumbent and, lastly, the present emoluments and pecuniary benefits should not be far in excess of those currently prevalent in the industry. Many of these conditions appear to stand violated in Bakshis case. His role in making corporates beneficiaries of soft loans and subsidies has been at odds with Nabard’s special mandate to promote rural development by providing soft loans to state governments for social sector projects. However, despite a letter dated 1 February 2013 by Gurudas Dasgupta, Member of Parliament and general secretary, Aituc, urging the then prime minister, Manmohan Singh to initiate a thorough probe into the functioning of Nabard in order to bring much needed relief to the rural poor, no action was taken. Dasgupta had further said that “evidence shows that Nabard’s shift in priorities is directly linked to the leadership of its chairman, Mr Prakash Bakshi, who, in a significant deviation of policy, included private entities as eligible institutions without consulting the RBI. A detailed questionnaire mailed to the department of financial services secretary, Anjuly Chibb Duggal, seeking clarity on the status of the pending charge-sheet against Bakshi and his decision to seek permission to work with SSLL, went unanswered. Another reason for the sudden disclosure of Bakshi’s employment status with SSLL could be that the company is learnt to have applied for listing on the Bombay Stock Exchange, for which disclosure of its top management team was mandatory. Curiously, Bakshi’s tainted background has not been a deterrent for SSLL, despite evidence that corporate governance, led by an able, professional and transparent board is the way both to better market valuations as well as to securing the long-term financial health of a firm. Questions mailed to SSLLs chief financial officer, Vishesh Singhvi, and to Bakshi himself, seeking the date of his joining the company, his compensation details and reasons for possible concealment of the employment history until recently also went unanswered. Apart from wilful, established conflict of interest during his tenure in Nabard, Bakshi has been occupying an SSLL company flat in Goregaon post his retirement from Nabard, without obtaining government clearance to work for them. Wrongdoers who abuse their positions are mostly responsible for the NPA (bad loan) pileups in the banking sector, which is affecting the entire economy. Rather than punish them, the system rewards such people, said a top official in Nabard on condition of anonymity. Policies customised for SSLL? After becoming Nabard’s chairman in June 2011, Bakshi developed close ties with Aditya Bafna, Executive Director of SSLL, who was appointed Director on the board of Nabard Consultancy Services Pvt Ltd (Nabcons), a wholly-owned subsidiary, on 15 January 2010. Within a few months, in a significant deviation from Nabard’s mandate and earlier policies, Bakshi made private entities eligible for soft loans for warehousing projects for the first time through a circular dated 27 September 2011. This was done without consulting the Reserve Bank of India. Through another circular dated 23 December 2011, the scheme was revised to allow private firms an interest rebate of 1.5 percent, again without consulting the RBI. Between 16-31 March 2012, Nabard disbursed Rs 759 crore, including refinance at 8 percent, to banks to fund 516 warehouse and cold storage projects. SSLL, the biggest beneficiary, accessed Rs 180.87 crore, purportedly to set up 18 warehouses, with an additional refund of Rs 20 crore through a 15 percent subsidy benefit given to it under another scheme. Funds were disbursed even when SSLLs projects were found to be ineligible for the subsidy by the Ministry of Agriculture. Sources in Nabard allege that even when SSLLs projects failed to meet eligibility criteria, officials would be harassed, served charge-sheets and retirement benefits withheld for legitimately rejecting its applications. They say Bakshi punished and disbanded the original team which rejected the proposal for the release of subsidy, based on the Ministry of Agriculture’s guidelines and a special team was put in place to fast-track the clearance. Poor governance: The nature of the violations, made often by ignoring the directions given by the RBI and the Ministry of Agriculture, and the clear conflict of interest were first detailed in this article. A week later, Nabard, under fire from the RBI, was forced to withdraw its controversial schemes and seek a refund from those to whom it was disbursed, which was highlighted in this article. However, instead of accepting blame, Nabard tried to shift blame for the financial transgressions and conflicts of interest highlighted in the media to the RBI and the finance ministry. Nabard’s story kept growing progressively worse, with evidence of selective allocation of grants to an NGO called Janhit Foundation, Lucknow, that is linked to former DFS Secretary, DK Mittal. The DFS secretary, in his/her official capacity has a strong hand in Nabard’s decisions. Mittal’s influence can be adequately gauged from the fact that total grants of Rs 7.88 crore were disbursed to 303 NGOs in Uttar Pradesh in 2012-13, Janhit Foundation alone secured Rs 6.01 crore. A meagre Rs 1.87 crore accounting for an average grant size of between Rs. 8,000 to Rs. 80,000 was disbursed to the remaining 302 NGOs. Interestingly, Mittal was unsinged by the media fire. He serves as an independent, non-executive director at Max Life Insurance Company Ltd. He was also handpicked by Railway Minister Suresh Prabhu to head a high-level panel to recommend ways to resuscitate the Railways’ financial health in December 2014.