Dena Bank, OBC shares fall over Rs436 crore fraud

Dena Bank officials allowed Rs256.69 crore transfer through overdraft facility, while OBC transferred Rs180 crore received from JNPT as bulk deposit to one Padmavati International


Shares of Dena Bank and Oriental Bank of Commerce (OBC) fall on Wednesday following a news report about Rs436.7 crore fraud in their branches. Dena Bank has suspended its 'erring' branch manager and transferred some staff members. OBC, on the other hand said it has initiated departmental action against erring officials.


Dena Bank closed Wednesday 5% down at Rs60.1, while OBC ended the day 6.5% down at Rs264.5 on the BSE. The 30-share Sensex closed the day marginally down at 26,314.


In a regulatory filing, Dena Bank said, "Malabar Hill Branch of the Bank received bulk term deposits from various entities and government organizations between 30 January 2014 and 5 May 2014. Subsequently, term deposits amounting to Rs256.69 crore were pledged to the Bank by the same signatories to obtain overdraft facilities of Rs223.25 crore. The funds were surreptitiously transferred out of the Bank by creating fake overdraft facility, resulting in a fraud on the Bank and the concerned entities, Government organizations."


OBC, in its regulatory filing said, "Surreptitious transfer of funds from our Malwani, Mumbai Branch: Jawaharlal Nehru Port Trust (JNPT) had placed funds aggregating Rs180 crore with the Bank initially for the purpose of term deposit in two tranches in February 2014. These funds were surreptitiously transferred out of the Bank to Padmavati International upon instructions of the same signatory/constituent. Padmavati International remitted the amount to seven banks and 12 clients. Later, when JNPT complained about non-receipt of term deposit receipt, the Bank replied that the funds have been transferred on their instructions only."


"JNPT has filed a case with Central Bureau of Investigation (CBI) and the matter is under investigation. Out of the above, Rs110.12 crore lying with other banks has been seized under instructions of CBI, Rs64.31 crore is untraced as on date and the balance Rs5.57 crore, which was lying with us has been remitted back to JNPT," OBC said in the filing.


The Finance ministry has taken note of these instances and has ordered a forensic audit of the two public sector banks, say reports.




2 years ago

I think this type of fraud is not new in Dena bank. A branch manager from Kerala(QUILON/KOLLAM) was arrested some months ago by the CBI

Veeresh Malik

2 years ago

Banks urgently need to put out a simple Fixed Deposit product which says clearly across, like a "NOT NEGOTIABLE crossing, that "THIS INSTRUMENT IS NOT AVAILABLE FOR FACILITIES OF ANY SORT" and specifies also that in case of any activity on the FD, the proceeds should go back only to such-and-such account.

Sensex, Nifty to give up some gains – Wednesday closing report

Nifty will be headed lower, if its closes below 7,850


We have been mentioning for the past two days that the indices would pause and move sideways.  This is exactly what happened. Although the Indian market made the highest ever opening Wednesday it soon lost steam and plunged in the negative. It continued to trade there with unsuccessful attempts to turn positive. Today, for the first time after six days of consecutive positive trading, the market closed in the negative.

S&P BSE Sensex opened at 26,496 and immediately hit its intra-day high at 26,505 while NSE's CNX Nifty opened at 7,916 and hit its high at 7,923. Both Sensex and Nifty moved lower to hit the day’s low at 26,278 and 7,864, respectively. Sensex closed at 26,314 (down 106 points or 0.40%) while Nifty closed at 7,875 (down 22 points or 0.28%). NSE recorded a volume of 82.51 crore shares. India VIX fell 1.76% to close at 13.6600.

According to the recent report from ratings agency ICRA, Indian pharma companies would continue to experience strong growth in the US over the medium-term. This growth will be driven by the sizeable generic opportunity over the next 2-3 years and strong product pipeline of pending ANDAs. The report also mentions that acquisitions by Indian companies to gain technological capabilities and focus on strengthening branded business are also likely to drive growth going forward. Sun Pharma, Ranbaxy, Cipla and Aurobindo Pharma, which made to the top six gainers in the ‘A’ group on the BSE hit their 52-week high today. Sun Pharma, Cipla and Dr Reddy were among the top three gainers in Sensex 30 pack.

Dena Bank, which was named in a fixed deposit scam clarified that it has lodged a complaint in this regard with CBI. It has also suspended the erring branch manager and transferred the staff of the concerned branch. It was the top loser (5.06%) in the ‘A’ group on the BSE.

Bhushan Steel (-4.97%) which has continued hitting its new 52-week low today, also has been looking at options to reduce debt. The lenders, which met on Monday has asked the steelmaker to sell and lease back some of its critical assets to reduce debt, as the borrower is finding it difficult to raise equity from the market. It was among the top two losers in ‘A’ group on the BSE.

The oil ministry has told the Delhi high court that allegations levelled against it by Oil and Natural Gas Company (ONGC), were "frivolous" and the government had taken all necessary steps to resolve its complaint charging Reliance Industries with siphoning gas from its blocks in the Andhra offshore field. ONGC was the top loser (2.62%) in Sensex 30 stock.

US indices closed Tuesday in the positive.

Housing starts posted their strongest rebound in eight months in July, topping expectations and adding another data point to suggest optimism is returning among homebuilders.

The minutes from the last Federal Open Market Committee meeting will be released later in the day.

Except for Shanghai Composite (0.23%) all the other Asian indices closed in the positive. NZSE 50 (0.51%) was the top gainer.

European indices were trading in the negative while US Futures were trading flat.
The Bank of England in its minutes from August policy meeting published in London said the policy makers were split on rate increase.


Demand for pooling price of imported and domestic gas

There is urgent need for a revision of gas prices to a realistic level and consequently, a revival of the idle gas-based power generating capacities in the process


Reliance Industries Ltd (RIL) and its partners, BP and Niko Resources, have decided to "go slow" on investment including proceeding with the R-cluster development project in the D6 block. R-cluster is a series of small fields in the block being developed together and they hope to obtain 5 mmscmd initially by 2017-18 and subsequently reach 10 mmscmd to the current output with R-cluster. At the moment, three producing fields in the block are D1, D3 and MA, whose total production is about 13.05 mmscmd.


It may be noted that the contractors in KG-D6 were planning to invest over $5 billion in the next three to five years in a series of projects to develop around 4 trillion cubic feet of gas discovered in the block. Delays in revising the price have set their plans in a limbo.


In the past, Oil Ministry was looking at a price level in the range of $6 to $6.50 per unit for domestic gas as against the earlier proposed price of $8.40. Neither the Directorate General of Hydrocarbons (DGH) could prove that the claim of "geographical surprises" by Reliance was false nor could it produce evidence to show that gas "exists" in the wells but the contractor did not want to draw it out!


There is no doubt that the NDA ministries have been working overtime to resolve this issue. Power Ministry has now renewed its demand for pooling the price of imported and domestic gas, so as to ensure gas-based power projects get a boost and much needed support.


This pooling refers to the weighted average of price of imported gas and domestic gas based on proportion of volume. Officials from Power, Petroleum and Natural gas will present their views to PMO. The outcome may not be immediately announced, and it is likely to be deferred for a fortnight, or so.


Data presented at various meetings indicate that about 5 tcf of gas is yet to be extracted from Reliance blocks in Krishna-Godavari and Mahanadi basins. It is reported that the officials feel that the Contractor (Reliance) would become eligible for charging the new price only after it makes up the shortfall of 1.9 tcf. Reliance can then get the higher price, when fixed, for about 2.5 tcf. Their claim is that the cost of production is $3 per unit and even at the price of $4.2 the contractor was making profits!


In so far as the power sector is concerned, they want gas at an "affordable" price and subsidy for the state distribution utilities to enable them to purchase electricity generated from gas-based plants. Electricity generated from gas costs not less than Rs5 per unit and the consumer gets it at about Rs6 to Rs7 per unit. As against this, electricity generated from coal-based units cost Rs3 to Rs3.50, which is sold to the consumer at Rs4 to Rs5.30.


As on 30th June, gas-based power generating plants total capacity was 21,211 MW. But they were actually operating at an average plant load of 23%. Thus, 77% of the production capacity remained idle. This is unaffordable in a country which is hungry for power. Out of this installed capacity, 6996.5 MW is totally or predominantly dependent upon D6 gas. This has been lying idle since the gas supplies stopped from March 2013.


Why did the Power Ministry not take the initiative to obtain the gas to keep the full capacity in operation? This is while knowing fully well that gas supplies from D6 were falling or slowing down.


It may be noted that the landed cost of imported gas from long term contract is $12 per mmBtu, while it is available at $13.5 to $14 to the user. LNG or imported gas, brought from the spot market is available at $10/$10.5 per mmBtu and the user buys it at $12.5 to $13. Set against these, the domestic gas price has been in the range of $4 to $5.7 per mmBtu. For the power plants it costs $7 to $8 per mmBtu after the addition of local taxes, market margins and transmission charges.


According to the power companies, every dollar increase in gas price will increase power costs by 45 paise per unit and the financial health of distribution utilities in the states may not allow them to purchase expensive electricity. This is because the ultimate consumer, the aam aadmi, cannot afford to pay the price!


Fixing the gas price, which will be applied to all the domestic producers, is a very difficult proposition. Yet this matter has to be resolved soon and a pooling arrangement looks, at least, practical.


In so far as Reliance is concerned, they need to be persuaded to continue their exploratory work in the country and continue their investment programme to obtain the much needed gas from R-cluster. As for the shortfall that has already occurred, the best solution would be for the government to fix the common approved price for the gas to be supplied, keeping a record of the "unsupplied" quantity in suspense. They need to have an independent, qualified consultant to carry out the investigation to find the actual situation - whether it was a geographical surprise or not. A penalty for non-supply has already been imposed on the company and what needs to be done is to find the truth of the matter. If there is no gas down in the wells, where would they get it from?


In the meanwhile, Reliance plans to invest $2 billion in the US in its shale assets, betting big on extracting both natural gas and oil from sedimentary rock formations in Marcellus region where the company has agreements with Chevron and Carrizo Oil and Gas Inc. Its production from shale business is about 15 mmscm of gas per day which is higher than its production of 8 mmscm of gas from D6 block in the KG Basin!


Power Ministry should now direct its energy in arranging for gas to be supplied to the power generating units which are having huge idle capacities.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


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