Criminals in RBI

 DALIT  ONLINE

Bi-Weekly e news  paper  

Editor: Nagaraja.M.R.. Vol.19....Issue. 49........18 / 06 / 2023

Editorial :  Criminals in RBI & Indian Government

-         Crimes hidden by  GOI  Public Servants

Public money in banks are not property of  any bank manager or of any RBI executive or of any  finance ministry  official or  of any MLA , MP or minister. They are all  TRUSTEES of public money only not owners of it.

Before making big decisions like write offs of thousands of crores of public money RBI must conduct public hearing  to ascertain  public objections.  

  Inspite of repeated RTI requests  Public servants of  RBI , GOI   are dodging questions under various pretexts. Ultimately they are hiding crimes worth crores of rupees and  leading to  loss of lives.  Who will bell the cat ?

Answer Honourable RBI Governor.

Your's

Nagaraja Mysuru Raghupathi

Why Is the RBI Supporting Wilful Defaulters at the Cost of Middle Class Depositors?

RBI's move to settle loans of wilful defaulters will a have serious impact on the banking system. It is the middle class people whose deposits will be used for writing off loans with a small recovery.

Wilful defaulters and companies involved in fraud can go for a compromise settlement or technical write offs by banks and non-banking finance companies, as per the new RBI circular.

“A wilful defaulter is a borrower who refuses to repay loans despite having the capacity to pay up,” as per the definition. And, “a fraudster is one who intentionally cheats the bank with false documents/information and misappropriates the money.” Both are criminal offences.

Till 2019, the RBI had clearly instructed the banks vide its circular notification ‘RBI/2018-19/203, DBR No.BP.BC 45/21.04.048/2018-19 dated 7.6.2019 vide para 34’ as “borrowers who have committed frauds/malfeasance/wilful default will remain ineligible for restructuring”.This was a reiteration of the earlier instructions which existed for long and were in force till June 8, 2023. 

Shockingly, the central bank modified its circular ‘RBI/2023-24/40 DOR.STR.REC.20/21.04.048/2023-24’, dated June 8, 2023, allegedly to help wilful defaulters and fraudsters who are criminals. It says in para 6(ii), “Proposals for compromise settlements in respect of debtors classified as fraud or wilful defaulter, as permitted in terms of clause 13 of this annex, shall require approval of the Board in all cases.”

 Regulated Entities may undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceedings underway against such debtors.Since 2014, the Government of India has not appointed officer directors and employee directors in public-owned banks and the Boards have political supporters of the ruling party. The RBI has not questioned the non-appointment of the officer and employee directors.

One of the deputy governors of the RBI recently lamented about the functioning of the boards while addressing the board of directors of public-owned banks.So it’s anybody’s guess how boards will approve compromise settlements.

 They don’t have any accountability unlike the officers and employees. Without the watchdogs from associations and unions, the Boards have become opaque and their decisions are not even available under the Right to Information.We also know what happens to the cases once compromise settlement is arrived at.

This is going to have a serious impact on the banking system. It is the depositors from the middle class whose deposits will be used for writing off loans with a small recovery. And, the criminals can once again avail loan! His CIBIL rating will improve as his data will be cleansed. Naturally, the good borrowers who are promptly repaying will start defaulting. 

This will affect the banks. Except the borrowers who have given strong collateral, others will tend to default and expect write off.Who are the people who are going to be benefitted? 

In 2018, it was reported that out of 5,600 wilful defaulters, 15% were from Gujarat.Here is the RBI data on top 50 wilful defaulters in 2022:ABG Shipyard (Rishi Agarwal), Winsome diamonds (Jatin Mehta), and many of the other wilful defaulters are close to the corridors of power. Some are already abroad. ABG Shipyard’s Agarwal, who cheated 28 banks to the tune of Rs 23,000 crore, can now have a compromise settlement.Similarly, Mehta, who is a close relative of Adani, who ran away, can now return. The same could be the case with Vijay Mallya, Mehul Choksi, Nirav Modi, and others. They will fund the election campaigns.The National Company Law Tribunal (NCLT) is already helping the defaulters. Even the Parliament Standing Committee has strongly criticised NCLT. 

In the last 10 years, NPA reduction due to write off stands at Rs 13,22,309 crore.There is going to be another bigger political gain. In the last nine years, the banks have given Mudra Loans worth Rs 24,05,753 crore to over 42 crore borrowers up to June 9, 2023. See the year-wise sanctions given below:The finance minister has been giving targets to the government-owned banks which are also forced to lend to non-banking finance companies for on-lending and co-lending. In many places, the ruling party cadres tell the borrowers that this is a gift and not to be repaid. 

So, NPAs are increasing and banks are writing off 25% and claiming 75% from the Credit Guarantee Fund. But the borrower’s CIBIL score gets affected. Most of them are wilful defaulters. Now they can pay a little, clear the CIBIL score, and borrow again.Let’s take a look at the frauds. 

In 2023 alone, 13,530 frauds were reported by banks to the RBI. In 2021 and 2022, public-owned banks reported Rs 97,245 crore frauds in accounts outstanding above Rs 100 crore alone. See the bank-wise list below:In the last five years, banks have reported 983 frauds above Rs 100 crore to the tune of Rs 3,76,400 crore. Is it correct to compromise with these criminals? This is a clear loot!Through the NCLT, established under the Insolvency and Bankruptcy Code, lakhs of crores of public money has been written off in the name of haircut. 

Banks are given some capital to carry out this siphoning off of money to few rich corporates. They in turn support the political party through electoral bonds and other ways.The write offs of smaller loans provides dividend in the elections as the number is huge.The bank’s balance sheets are shown as clean with high profits at the cost of depositors who get less interest, pay more bank charges and small borrowers who pay high interest. Now it will be easy to sell them in the name of privatisation!

The RBI is being used as a tool for political gain, which is a violation of law.Section 21 of the Banking Regulation Act reads: “[The] power of Reserve Bank to control advances by banking companies (1) where the Reserve Bank is satisfied that it is necessary or expedient in public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally.”This compromise settlement of wilful defaulters loans and fraudsters loans is neither in public interest nor in the interest of depositors. It is a violation of law. This has to be withdrawn.

All India Bank Officers Confederation and All India Bank Employees Association have strongly condemned the RBI and demanded withdrawal of the instructions failing which the depositors will be affected and defaults will increase and there will be no faith in the system. This may lead to a collapse. Political parties and the public will have to rise to the occasion. Banks can’t be used for political gains at the cost of more than 100 crore small depositors.

Rs.88032 crore missing from RBI 

RTI query reveals mismatch between numbers of Rs 500 notes printed, received by RBI, Rs 88032 crore missing

The report claimed the three Indian mints issued 8,810.65 million pieces of the newly designed Rs 500 note but the Reserve Bank of India received only 7260 million.

An RTI query has revealed a gigantic mismatch between the numbers of Rs 500 notes printed in Indian mints and those received by the Reserve Bank of India. Per a Free Press Journal report, the value of the reportedly unaccounted notes is a staggering Rs 88,032.5 crore.

The report claimed the three Indian mints issued 8,810.65 million pieces of the newly designed Rs 500 note but the Reserve Bank of India received only 7260 million. The remaining number of notes is reportedly missing, said the website.

FPJ's queries over the explosive claim to the RBI have now been clarified, and the central bank issued a response about the same.

Indian currency notes are printed in three government-run mints -- Bharatiya Reserve Bank Note Mudran (P) Limited, Bengaluru, Currency Note Press, Nashik, and Bank Note Press at Dewas. These three mints send printed notes to the Reserve Bank of India. It is the RBI that maintains and manages the flow of cash in the country.

FPJ reported activist Manoranjan Roy filed an RTI query with the Reserve Bank of India regarding the status of Rs 500 notes. The report claimed the Nashik mint printed 375.450 million pieces of the newly designed Rs 500 note but the RBI records show it only received 345 million pieces between April 2015 and December 2016, In another RTI reply, the Currency Note Press, Nashik, said for the financial year 2015-2016 (April 2015-March 2016,) 210.000 million pieces of Rs 500 were supplied to the RBI when Raghuram Rajan was the RBI governor, reported FPJ.

The Bharatiya Reserve Bank Note Mudran (P) Limited, Bengaluru, supplied 5,195.65 million pieces of Rs 500 to the RBI and the Bank Note Press, Dewas, supplied 1,953.000 million pieces to the RBI in 2016-2017, but the RBI has received only 7,260 pieces of the newly designed Rs 500 note from all three printing presses, reported FPJ.

Hence, RBI received only 7260 million pieces of bank notes as against 8810.65 million pieces printed by the three mints.

Roy told the website that such a huge number of missing notes is a threat to national security. He has written to the Central Economic Intelligence Bureau and ED seeking probe into the matter.

RTI information request to Honourable Governor Reserve Bank of  India

1.        Is  rowdy behaviour by bank loan recovery agents  with small borrowers approved by RBI ?

2.        Why same rowdy tactics is not applied to industrialists defaulting  on crores of rupees loan ?

3.        Across India leading Jewellery brands , jewellery shops are running monthly gold chit fund schemes and collecting money from public. Is it approved by  RBI ?

4.        Who is responsible to pay money to account holder in case of closure of  a neo bank ?

5.        Who will pay money to  nominee of deceased account holder in a neo bank ?

6.        There are many loan apps , buy now pay later apps  on web offering loans and  collecting exorbitant interests and using rowdies as loan recovery agents. Are they  approved by RBI ?

7.        In Mysuru currency note printing press ,  where and how hazardous  printing waste is disposed off ?

8.        Few years ago boy Harshal  residing  near  RBI  Currency press mysuru compound  died after coming in contact with industrial waste.  Did  that waste belong  to currency printing press mysore ?

9.        If  above stated cases by banks and it’s subsidiaries are not approved by RBI , then what  action is taken by RBI against above stated crimes ?

10.      Give me list of  yearly  NPAs , book write offs for each  public sector banks  from 2002  to 2022.

11.      Give me list of action taken against bank officials  respinsible for NPAs and  write offs  since  2002 to 2022.

12.      Give me list of  action  taken  against  real criminals in soiled note currency scandal RBI Bangalore and  currency note thefts in RBI currency press.

13.      How RBI monitors  irregular wealth growth of  bank officials  while  NPAs , write offs for banks grows  year on year ?

14.      Before demonetization how much  numbers of Rs.500 and Rs. 1000 was printed and released for circulation ?

15.      After demonetization  how much numbers of Rs.500 and Rs. 1000 was  received by RBI ?

16.      What is the criteria for appointing independent directors by banks   to  company board which has availed bank loans ?

17.      While general public , employees  can clearly make out  , identify  insider trading , transfer of  funds to sister concerns / shell companies with respect to  companies availing huge bank loans , bank managers / bank appointed directors are myopic. What action is taken by RBI against such bank managers , bank appointed directors ?

RBI aiding corporate frauds ?

To

Shri Shaktikanta Das

Governor

RBI

Dear Shri Das,

    I refer to RBI’s latest guidelines issued on 8-6-2023 (Notification No.RBI/2023-24/40

DOR.STR.REC.20/21.04.048/2023-24 8-6-2023) on Framework for Compromise Settlements and Technical Write-offs, modifying the earlier guidelines issued on 7-6-2019 (Notification RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 7-6-2019).

Para 34 of the 2019 notification stipulated, “Borrowers who have committed frauds/ malfeasance/ wilful default will remain ineligible for restructuring. However, in cases where the existing promoters are replaced by new promoters and the borrower company is totally delinked from such erstwhile promoters/management, lenders may take a view on restructuring such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters/management”

In contrast, the latest notification dated 8-6-2023 reads as follows:

“Para 6 (ii): proposals for compromise settlements in respect of debtors classified as fraud or wilful defaulter, as permitted in terms of clause 13 of this Annex, shall require approval of the Board in all cases.

Para 13 (Annexe): REs (regulated entities) may undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors“

In other words, RBI has, for reasons best known to it, made a volte-face and abruptly relaxed the 2019 stipulation that no “compromise settlement” would be permitted in the case of “borrowers who have committed fraud/ malfeasance/ wilful default“, implying that a borrower who has committed fraud or one against whom criminal proceedings for fraud are ongoing, in respect of funds borrowed from a bank, would hereafter be eligible for loans from that bank. Fraud implies a promoter falsifying accounts and syphoning off the borrowed money for personal gains. It may also involve laundering of the borrowed money to overseas shell companies either for tax evasion or for misusing it to manipulate the domestic stock market, as has been the case with several wilful defaulters in recent times.

Allowing wilful defaulters charged with violating the law of the land and misappropriating funds already borrowed from the banks, to borrow additional amounts from the same banks, would amount to outright condonation of fraud and making a mockery of the legal system we have.

Compromise settlements such as this one, which amount to condoning fraud, not only expose the hard-earned savings of the banks’ depositors to considerable risk but also encourage wilful defaulters to take further risks including committing acts of malfeasance, at the cost of the banking system. It is clearly a case of undue risks being taken by borrowers, with the corresponding costs inflicted on depositors.

Does not the RBI have the statutory obligation, as the banking regulator, to safeguard the interests of the depositors and the interests of the government which holds dominant shareholding in PSU banks? By issuing such an imprudent set of guidelines, is not the RBI triggering yet another crisis of non-performing assets that plagued the banking system during the last decade?

Section 21 of the Banking Regulation Act in pursuance of which the RBI issued the above 2023 notification reads as follows:

“Power of Reserve Bank to control advances by banking companies.—(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally”

Since the 2023 notification is neither in the interests of the depositors nor in the public interest, strictly, it violates the letter and the spirit of the above statutory requirement.

While the banks are encouraged to “technically write-off” bad loans from their financial statements to provide false comfort to the government and the public at large, according to statements originating from the Finance Ministry (https://economictimes.indiatimes.com/industry/banking/finance/finance-ministry-wants-state-run-banks-banks-to-enhance-recovery-rate-from-written-off-accounts-to-about-40/articleshow/99908818.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst), the rate of recovery from written-off loans is hardly 15%, suggesting that the so-called “technical write-off” of loans reflects that most of those loans cannot be recovered, which shows that there is no case whatsoever for condoning wilful default by borrowers, more so, no case for providing any leeway to those who commit fraud.

The PSU banks, forced to extend credit to the private corporate sector in the name of facilitating economic growth, already face a wide range of problems, such as asset-liability mismatch, unfair competition with private banks etc. RBI’s latest compromise settlement guidelines will only exacerbate the health of the PSU banks by sowing the seeds of yet another NPA crisis, which can cripple the economy.

I feel that the RBI should revisit the 2023 compromise settlement framework and rescind it. Instead, there is a strong case for RBI to tighten the restrictions on wilful defaulters.

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to the Government of India

Legislation loop holes aiding shell cos

To

Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

I had earlier addressed you vide my letter dated 31-1-2023 (https://countercurrents.org/2023/02/overseas-shell-companies-a-shadow-economy-a-threat-t-national-interest/) pointing out how the government failed to define the term “overseas shell companies” in the Companies Act, SEBI Act and other related legislations, despite admitting to the Parliament as early as 6-2-2018 that there was an urgent need for such a consistent definition, a legislative omission that in turn indirectly helped domestic business houses to park their wealth in overseas shell companies and profiteer at the cost of the domestic economy.

In the same letter, I also referred to the Department of Economic Affairs notification GSR 646(E) dated 22-8-2022 which provided yet another legislative loophole for similar exploitation by domestic private companies.

The Expert Committee constituted by the apex court to examine the implications of the Hindenburg report on the Adani Group, in their findings submitted on 6-5-2023, observed, among others, in [Para 23(b) of their report] that “the very requirement to disclose the last natural person above every person owning any economic interest in the FPI was done away with in 2018” by a SEBI notification (apparently in reference to SEBI/LAD-NRO/GN/ 2018/58. 31-12-2018), suggesting that SEBI created a legislative constraint for itself that came in the way of its subsequent attempts to investigate the post-Hindenburg developments.

In other words, between 2018 and now, a series of legislative gaps either created or left uncovered by the Finance Ministry and SEBI, have indirectly contributed to domestic business houses parking their wealth in overseas shell companies and profiteering at the cost of the domestic economy. This is a matter of serious public concern that calls for an independent enquiry.

May I request the Ministry of Finance to institute such an inquiry to clear the air, not only with reference to the Adani matter but also with reference to overseas shell companies set up by other domestic and foreign-listed business houses operating in India?

Regards,

Yours sincerely,

E A S Sarma

Former Secretary to the Government of India

Visakhapatnam

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