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Banking scams: MUDRA, Kisan Credit Card loans next big worry for govt; PMO alerted about Bihar's Rs 500-cr fraud

New Delhi: At least five government-owned banks in Bihar are likely to take a fiscal hit worth Rs 500 crore under a heap of bad loans and shoddy verification in the disbursement of the Kisan Credit Cards and the prime minister's flagship MUDRA (Micro Units Development and Refinance Agency) scheme. Two complaints have been filed with the Prime Minister Office (PMO), Union Ministry of Finance, Central Vigilance Commission (CVC) and top brass of the Bank of India (BoI), State Bank of India (SBI), Allahabad Bank, Punjab National Bank (PNB) and Bank of Baroda (BoB), raising a stink in loan disbursements. It is alleged that middlemen in connivance with bank officials in the district of Rohtas (Sasaram) conned the banks using fake certificates and false appraisals to obtain loans.

Whistleblower Vijay Kumar Choudhary, a former member of constitutional body National Commission for Scheduled Castes, has told the PMO that he had gathered evidence before filing the complaints, alleging loan fraud worth over Rs 500 crore and sought a probe by the Central Bureau of Investigation (CBI) to book the culprits preying on the vulnerable rural population. If Nirav Modi and Mehul Choksi were sharks, the middlemen operating in the hinterland using people like Paras Ram and Ashok Pandey are small fish in the growing NPAs. Ram's — a resident of Purvi Bhelari — credentials were used by the middlemen to obtain Rs seven lakh in MUDRA and Kisan Credit Card loans. Similarly, Ashok Pandey, an SBI account holder had sold his assets — house and land — way back in 2007, but middlemen forged the documents making him eligible to access a Kisan Credit Card loan.

Choudhary filed the first complaint to the PMO and finance ministry on 19 February, 2018 against Bank of India Mahror Branch in Sasaram. Choudhary has alleged that over Rs 100 crore was siphoned off from the BoI branch between 2012 and 2017 under various government schemes by producing forged credentials of alleged beneficiaries.

Choudhary's complaint, that is being examined by the PMO and finance ministry, carries an RTI reply from BoI admitting that investigation was carried out by the bank and further action is being taken against suspects involved in the loan disbursement fraud, including Kisan Credit Card and the MUDRA scheme launched by Modi in April 2015.

"Bank of India branch heads, loan managers and middlemen conned the bank between 2012 and 2017 under various government schemes including Kisan Credit Card and MUDRA, swindling over Rs 100 crore by producing fake names, addresses and asset papers. I had filed an RTI with BoI's Patna circle. They refused to divulge the amount of loans and details of beneficiaries citing it as personal and commercial information related to third parties. However, they have admitted to the fraud," Choudhary wrote in his letter to Modi.

The file accessed by Firstpost shows that BoI's RTI reply of 12 February this year confirms the fear.

"The bank has carried out an investigation and appropriate action is being taken against people suspected to have been involved," BoI's reply furnished by Information Officer Amrendra Kumar said.

A detailed questionnaire sent to the BoI zonal head, Patna and Chief Vigilance Officer remained unanswered.

Firstpost also reviewed a copy of evidence detailing five loans that were issued by BoI officials on the allegedly forged documents that include loans sanctioned and disbursed to Bhola, Santosh Kumar, Vikrama Ram and Baliram. All these loans were allegedly sanctioned on fake certificates.

 Banking scams: MUDRA, Kisan Credit Card loans next big worry for govt; PMO alerted about Bihars Rs 500-cr fraud

Representational image. PTI

Unscrupulous brokers and loan officers nexus

On 28 February, an unfazed Choudhary shot off another letter to Modi and the finance ministry alleging that a similar scam was unearthed in various other banks as well, but the officials were trying to conceal the findings.

"I have solid evidence that Punjab National Bank's Natwar branch officials in Sasaram during 2014-2017 conspired with middlemen to sanction loans under Kisan Credit Card, MUDRA and other welfare schemes. State Bank of India's Natwar branch was conned by its own officials and middlemen using a similar modus operandi," Choudhary wrote in his letter.

The SBI, however, refused to share details of loan sanctioned to the individuals and investigation carried out by the bank, citing the RTI Act 2005. The SBI’s RTI response ( RBO-4/RTI/333) dated 28 February, said, "Information sought cannot be provided because it is related to the third person which comes under the section 8 1(j) of the Act."

This particular section says "there shall be no obligation to give any citizen information which relates to personal information the disclosure of which has not relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or the State Public Information Officer or the appellate authority, as the case may be, is satisfied that the larger public interest justifies the disclosure of such information: Provided that the information, which cannot be denied to the Parliament or a state legislature shall not be denied to any person."

Choudhary, who is planning to appeal against the RTI response, argued that information sought by him is in larger public interest because taxpayers have been defrauded and the government is being misled. Choudhary, who is ready to share the evidence with investigative agencies, claimed that bank officials did not raise any alarm while issuing MUDRA and Kisan Credit Card loans on fake papers. He said some honest officers in these banks have turned whistleblowers and are ready to provide all the documents to the agencies and the government to expose the nexus.

"Bank of Baroda and Allahabad Bank's Dinara branches are also involved in swindling the money under these loan schemes. I have sought details from all these banks through RTI but instead of providing information, they are trying to cover up the scam. They have also refused to divulge details related to internal investigations," Choudhary said.

Firstpost had sought comments from Punjab National Bank, Bank of Baroda and the SBI seeking their versions of the story. but repeated attempts and detailed questionnaires yielded no response.

Chaoudhary has alleged that brokers are well-networked and powerful people. A week after his complaint, Choudhary alleged, the state police acted with vengeance and withdrew his security leaving him vulnerable.

"I was surprised to receive a letter from the Patna Police dated 26 February, 2018 informing me that my security is being withdrawn due to lack of police personnel. Subsequently, I received several messages from mafias offering me huge amount of money if I was ready to withdraw my complaint filed to the PMO. I am a whistleblower in this massive scam and facing a threat to my life but police authorities ignored it completely," Choudhary told Firstpost.

Why government schemes fall prey to loan fraud

Government schemes like the Kisan Credit Card are susceptible to grand theft because they offer loans without collateral security to farmers and have flexible repayment options. A study published by National Bank for Agriculture and Rural Development (NABARD) in 2017 observed that the number of operative/live Kisan Credit Cards as on 31 March, 2015 stood at Rs 7.41 crore.

"This achievement is against the total operational land holdings estimated at Rs 13.83 crore by Agricultural Census (2010-11)." The regulatory body also revealed that there were cases where land certificates to get Kisan Credit Card loans were found to be fake or reported to have been used simultaneously in two banks to get Kisan Credit Card account opened in more than one bank. "Land records/revenue records were not available online, which created problems for banks to verify these records and also there was no facility for the online creation of charge on the land records,"
the NABARD report had said.

NABARD had lauded the scheme claiming that Kisan Credit Card holders were earning more money than non-Kisan Credit Card farmers. However, it added that the overall impact depended on the resources. "The overall impression is that the implementation of Kisan Credit Card scheme has certainly benefited agriculturists albeit in varying magnitude to different farmers depending on the availability and quality of land resources and their capacity to manage various resources," the NABARD report said.

On the other hand, scamsters are also targeting the MUDRA scheme that aims to create an inclusive, sustainable and value-based entrepreneurial culture. Just two days after Choudhary's complaint to the PMO, a case had surfaced in Barmer (Rajasthan) where Punjab National Bank was duped by over Rs 62 lakh. The branch manager in connivance with unknown people had fraudulently sanctioned 26 MUDRA loans. The CBI had registered a case on 21 February disclosing that no pre-loan sanction, inspection and physical verification was conducted and no post-loan sanction was conducted to verify the end use.

The CBI in the Barmer case said: "Rate of interest of MUDRA loans is relatively lower in comparison to other loans. The important aspect of the MUDRA loans scheme is that it does not require any collateral security However, after sanction/disbursement of loan, the asset is mandatorily required to be created out of the loan amount and the same is then mandatorily required to be charged with the bank as security (so that the disbursed amount of loan is secure). It has also been learnt that loans have been sanctioned to the persons who are not even living in Barmer. Further, the bank cannot recover the outstanding amount of Rs 62,40,773.50 as no security is available with the bank. Thereby, the suspect public servant caused a wrongful loss of Rs 62.4 lakh the bank and corresponding wrongful gain to himself and other unknown persons. During the verification process, it has also been learnt that an inquiry has also been conducted by the office of the DGM, PNB, Jodhpur in this matter and SO was also suspended from the bank, but later on he had been revoked and is presently posted at Punjab National Bank, Abu Road branch."

In 2015-16, Rs 1,32,954 crore was disbursed under the MUDRA scheme followed by Rs 1,75,312 crore in 2016-17 and Rs 2,01,977 crore in 2017-18.

Choudhary has asked the PMO and finance ministry to conduct a thorough inquiry into MUDRA loans in Bihar branches of state-owned banks as he claims to have substantial proof of misappropriation of government funds. "It is a serious matter and government must order CBI probe to recover the money and prevent more fraud cases. The banks are also under pressure to meet the target by showing that huge loans are being disbursed. The brokers are happily taking advantage of it," Choudhary said.

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Updated Date: Mar 27, 2018 12:40:37 IST