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OBC, Dena Bank figure in 436 crore FD scam

Wednesday, 20 August 2014 - 5:00am IST | Place: New Delhi | Agency: dna

The Union finance ministry has unearthed a scam involving public sector banks. The ministry fears the Mumbai-based branches of Oriental Bank of Commerce and Dena Bank have misappropriated funds to the tune of Rs 436 crore.

It has ordered a forensic audit and has referred the case involving Oriental Bank to the Central Bureau of Investigation (CBI). Chairmen of both banks were not available for comment and didn't respond to e-mails. Dna has a copy of the finance ministry’s initial findings. 

Only recently, another public sector bank, Syndicate Bank, got embroiled in a bribe-for-loan scandal running into Rs 8,000 crore. 

What's the Dena Bank scam?
A branch manager mobilised fixed deposits (FDs) to the tune of Rs 256.49 crore from seven corporates. This was mobilised using middlemen. All formalities relating to opening FDs were done by middlemen. Once the FD was raised, fake fixed deposit receipts (FDRs) were sent to the organisations. The bank will retain the original FDR. The middlemen will then propose sanctioning of loans to some other organisations against the original FDRs. Loans are then disbursed in the third party accounts of these organisations. This scam was detected a month back.

What's the OBC scam?
Misappropriation of funds to the tune of Rs 180 crore was reported. This amount was deposited by an organisation as fixed deposit (FD). As the organisation didn't have an account in the branch, the branch manager transferred the funds to the sundry account. A sundry account is where the deposits of those who do not have an account in the branch is parked. FDs mostly get deposited here for the period till the account is opened. This money was again deposited in the current account, which, banking experts say, is wrong and must have been done to beef up the low interest deposit of the bank and fudge figures to meet the current account target. From here, the money was routed to third-party accounts. 

When did the scam come to light?
When OBC didn't open the FD account of the organisation at all, officials of that company complained about non-receipt of FDR. That's when the scam became public. The bank has already recovered Rs 110 crore and the CBI is examining the case now. Once the agency establishes a criminal intent in laundering FD money, there could be serious consequences for officials involved. 

But were there no alerts?
Yes. Alerts were generated and the controlling officer of OBC questioned the branch manager but no action was taken.

What will happen to these bank officials? 
The concerned branch officials are on finance ministry radar. The ministry cautioned all bank CMDs, through a communication last week, about such cases. “There are apparent procedural lapses by bank officials. Malafide, if any, on the part of the bank staff as well as officials of the companies which open these bulk deposits can be established only after investigation,” the ministry said.

What's the ministry doing now?
It has now issued guidelines to banks on how to handle bulk deposits. 

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