NEW DELHI: Despite finance minister Manmohan Singh’s defence of the Reserve Bank, the apex bank has been in the know about the massive irregularities in the banks for at least a year.
In fact, the RBI prepared elaborate guidelines regarding the transactions in securities in July, 1991. The RBI in a communication to Bank of Karad earlier this year recalled the then deputy governor A.Ghosh’s guidelines which pointed out “certain disquieting features observed by us in the securities transactions undertaken by some of the banks,”
The apex bank in this ‘secret’ communication said the deputy governor’s guidelines had urged the banks on investment policy to ensure that operations in securities are conducted in accordance with sound and acceptable business practices.”
The guidelines, inter alia, provided that the banks should strictly follow the guidelines prescribed by IBA Indian Banks’ Association in the matter and that the banks should issue BRs (Bankers Receipts) convening their own sale transactions only and should not issue BRs on behalf of their insolents including brokers.”
Releasing to the press a set of RBI documents marked “secret” and “confidential” CP] MP Gurudas Dasgupta and All India Bank Employees Association (AIBEA) general secretary T.Chakrabont said that the finance minister’s clean chit notwithstanding the RBI had been in the know of the banks irregularities in the security transactions,
They said that the RBI nominees on the boards of different banks had never objected to the noncompliance of its own guidelines, About the finance minister’s defence of the RBI governor, Dasgupta remarked, “The deputy governor could not have issued the guidelines without the superiors knowledge. Now one former governor is giving a certificate to the present one. While one should resign the other must be removed.”
In a confidential letter in January this year, RBI joint chief officer S.Gurumurthy asked UCO Bank chairman to “call on our Deputy Governor (A.Ghosh) at Bombay at the earliest by prior appointment for a discussion on the findings contained in the Report.”
This 39-page report enclosed with Gurumurthy’s letter indicted the UCO Bank with the observation that “investments” amounting to Rs.0.84 crore in shares of certain companies had no market value nor did they yield any return. Certain deficiencies were noticed in the management of the portfolio, for example, securities against money paid out had not been received in quite a few cases since 1988/89. Interest aggregating Rs 26.59 crore on securities remained unrealized as on March 31,1991, out of which an amount of Rs.3.95 crore was overdue for six months to more than two years.”
Censoring the bank further the RBI report said, “Apart from the official transactions, the bank’s Bombay (Hamam ST) branch un authorized indulged in investment transactions of a large magnitude with daily turnover varying between Rs.10 crore and Rs.1000 crore at the behest of certain brokers.”
Dasgupta and Chakraborti alleged that the balance-sheets of different banks finalized during May-June this year “do not reflect their true state of affairs.”
In a review of the functioning of the foreign banks in October 1990 Ghosh observed, “The funds received from clients under portfolio management which are deployed in various financial assets are off-balance sheet item. A scrutiny of transactions in Portfolio management in some banks reveals serious irregularities and Suitable action is being taken against the banke.
Dasgupta said that they would come out with more such documents to further establish the fact that the RBI had a role in the unprecedented scandal,
Article extracted from this publication >> July 31, 1992
