In a memorandum to the RBI, AIBOC has raised several questions over Dhanlaxmi Bank’s business operations
After whistleblowers raised a red flag raising questions about the operations of Dhanlaxmi Bank, the All-India Bank Officers Confederation (AIBOC) has alerted the Reserve Bank of India (RBI) regarding the bank’s wrongdoing. Specifically, it has alleged that the bank has manipulated accounts and provisioning, has a mismatch in asset-liability resources, maintains poor capital adequacy ratio and has huge dependence on call money borrowing.
It has also accused the bank for ignoring social banking and financial inclusion.
AIBOC’s Kerala committee, through a memorandum sent to the RBI, has appealed to the apex bank and the finance ministry, to initiate investigations against the bank management and asked it to merge it with any public sector bank to safeguard the interest of employees and the customers of the bank.
Speaking about the obvious mismatch in the asset-liability, it is stated in the memorandum that, “The Bank’s liquidity position is potentially dangerous with the enormous proportion of Inter Bank deposit in its deposit mix. Out of the Rs13,000 crore of deposits (that) the Bank has, around 70% are purchased funds, i.e., Inter Bank deposits (Rs1,600 crore), Certificate of Deposits (Rs2,500) crore and other ‘special-rate’ quoted deposits (at) Rs5,000 crore.”
According to the memorandum, the bank is heavily dependent on call money borrowing. “The average call money borrowing in the last one year is Rs300 crore per day. In fact, the Bank is borrowing from the call money market heavily since the last two years and is lending it with a margin in violation of the guidelines of the Reserve Bank of India.”
AIBOC says in the memorandum that the bank’s growth has be stunted with 50% fall in current deposits, from Rs1,500 crore to Rs790 crore, and sharp decline in its profit to Rs3 crore in the first quarter of 2011 from Rs55 crore in 2009. It also says, “Advances grew by 10% (Rs900 crore), but out of this, Rs550 crore are not retail loans, but “buyouts”.
The memorandum has cautioned the RBI about non-performing assets (NPAs) turning into bad debts, which would severely affect the bank. “The Bank’s capital adequacy ratio at present is touching 9%, and this can come down at any moment, in case a big loan turns (into an) NPA. The asset portfolio of the Bank is also equally daunting with more than 20% constituted by ‘buyouts’ and another 40% by corporate advances. The composition and health of these loans are not individually scrutinized and therefore have grave risk (of) further mounting of NPAs once these loans turn into bad debts for which there is every possibility.”
It further states that the bank has manipulated accounts and various provisions. “The available information is that the Bank adopted a lot of unscrupulous methods to show at least a nominal profit in the last one year. Deferring expenses like salary paid to executives, telephone, rent, ATM expenses, capitalizing revenue expenses like salary paid to staff etc are frequently practiced by the Bank.”
According to the AIBOC’s memorandum to the apex bank, Dhanlaxmi Bank recruited many new officers without uniform salary structure. “There is no policy for fixing remuneration of C to C employees. It depends on the relative bargaining strength of the new recruits. There is no transparency on the “performance linked bonus” or “joining bonus”, or “committed bonus” paid to C to C employees.”
AIBOC’s Kerala unit says, “The organizational structure has been revised umpteen times in the last 30 months. New “verticals” have come up but not stabilized because of the frequent changes. Some functions are duplicated, others neglected.”
The memorandum said that the bank has been avoiding granting loans to the priority sector such as small agricultural loans, educational loans, etc.
In fact, according to sources close to the development, AIBOC’s Kerala State Committee is holding a dharna in front of the regional office of the RBI in Thiruvananthapuram on this contentious issue.
Incidentally, according to AIBOC, there was detailed inspection by the RBI on Dhanlaxmi Bank. The apex bank, after coming out with “detailed inspection in Dhanlaxmi Bank, has come out with alarming facts about all the above and has asked the Bank to provide more than Rs100 crore towards the unaccounted expenses and provisions by debiting the net worth of the Bank.”
Dhanlaxmi Bank has refused to comment on the issue. It said that, “Like all banks, we are also regulated by the RBI and the growth is monitored by the regulator periodically. The baseless allegations are being spread by some people who are trying to spoil the image of the bank.”
In 2002 Sanjeev Dandona was charge-sheeted by the CBI along with seven other people, including three officials from the Transport Department of Delhi Government, for allegedly issuing forged permits for new auto-rickshaws
A local court in Mumbai has extended the custody of Speak Asia’s financial consultant, Sanjeev Dandona and the web designer, Nayan Khandor, who was responsible for designing e-surveys, till 12th October.
An official from the Economic Offence Wings (EOW), who preferred anonymity, told Moneylife, “Their custody has been extended till 12th October.”
Mr Dandona was arrested by the EOW on 29th September, after it was learnt that he was the proxy owner of Kritanj Management & Allied Services and is linked with Speak Asia. Kritanj Management is the master distributor of Singapore-based Haren Ventures Pte Ltd (HVP) for e-zines in India. Mr Dandona is also alleged to be advising HVP and Tulsient Tech Pvt Ltd and also transferring funds collected by Speak Asia agents to Singapore.
Just the day after the arrest of Mr Dandona, it was revealed that the online surveys, which Speak Asia used to claim (and its agents used to believe), were actually created not in Singapore, but in Mumbai. This was revealed following a confession from Nayan Khandor, a Web designer and director of Dadar (central Mumbai)-based Brand Salon, that his firm was active in creating the online surveys for Speak Asia.
According to an investigation officer, Mr Khandor confessed that he was given the task of creating online surveys and designing the e-magazine by Speak Asia's chief executive Manoj Kumar Sharma and has been involved in this job since February 2010. The material seized from Mr Khandor’s office also indicates his close relation with Speak Asia. He was arrested on 30th September.
When asked about the investigations, the official added, “They are being examined on various counts. Dandona has given some leads relating to the top bosses such as Manoj Kumar and Haren Kaur of Speak Asia. Nayan was just responsible for the designs, so not much has been revealed from him.”
Moneylife had reported earlier that Mr Dandona has confessed that Speak Asia was running a Ponzi scheme.
Earlier in 2002, Mr Dandona was charge-sheeted by the CBI (Central Bureau of Investigation) along with seven other people, including three officials from the Transport Department of Delhi Government for allegedly issuing forged permits for new auto-rickshaws. Last year in May, Justice Vipin Gandhi of the Delhi High Court dismissed Mr Dandona’s petition saying, "Prima facie, his involvement appears to be deep-rooted. It cannot be said that on the basis of the allegations contained in the charge-sheet the petitioner WP (Crl.) 586/2010 Page 15 of 16 may not have been involved in the criminal acts attributed to him. Consequently, I see no merit in this petition and dismiss the same.”
Nifty may move in the range of 5,030 and 5,135
Across-the-board buying by institutional investors and hopes of an end to the euro-zone debt crisis led the market higher for the second day in a row. Last week, we had mentioned that the trend is on the positive side; the index is now in the zone where we may see a move up to 5,000-5,100. Today the Nifty crossed the level of 4,955, which is its 20-day moving average, indicating further gains on the cards. The Nifty’s past two days’ gains has wiped off the losses of the three trading days ending 5 October 2011. From here, we may see the Nifty moving in the range of 5,030 and 5,135.
The domestic market opened flat ahead of the corporate earnings season, which kicks off this week. Negative sentiments in the global markets also weighed on investors. The Nifty opened down one point at 4,887 while the Sensex rose 37 points to resume trade at 16,270. The benchmarks fell to their day’s lows in initial trade with the Nifty falling to 4,882, and the Sensex slipping to 16,231.
However, across-the-board buying by institutional investors in subsequent trade resulted in all sectoral indices trading higher. The indices pared some of the gains in noon trade but the green opening of the key European indices after assurance from French and German leaders that they would come up with a new plan by the end of the month to ease the region’s debt crisis helped the domestic market edge higher in post-noon trade. The market hit the intraday high in the closing minutes of the session wherein the Nifty touched 4,991 and the Sensex 16,596. The indices closed near those levels with the Nifty gaining 92 points at 4,980 and the Sensex settling at 16,557, a jump of 325 points over its previous close. The NSE (National Stock Exchange) saw a volume of 54.73 crore shares.
The advance-decline ratio on the NSE was 1092:545.
While the broader indices also ended in the positive, they lagged behind the Sensex today. The BSE Mid-cap index gained 1.36% and the BSE Small-cap index rose 0.97%.
Barring the BSE Healthcare (down 0.06%), all other sectoral indices settled higher. The gainers were led by BSE Realty (up 3.22%), BSE IT (up 2.85%), BSE Consumer Durables (up 2.78%), BSE Oil & Gas (up 2.72%) and BSE TECk (up 2.66%).
The top Sensex gainers were Tata Motors (up 7.40%), Tata Power (up 5.44%), DLF (up 4.74%), Wipro (up 4.42%) and Sterlite Industries (up 3.48%). The top losers were Maruti Suzuki (down 3.58%), Sun Pharma (down 1.38%), Jindal Steel (down 1.37%), Cipla (down 0.82%) and Larsen & Toubro (down 0.51%).
The major gainers on the Nifty were Tata Motors (up 6.47%), Sesa Goa (up 5.51%), Tata Power (up 5.29%), DLF (up 4.84%) and IDFC (up 4.81%). Maruti Suzuki (down 3.79%), Jindal Steel (down 1.70%), Sun Pharma (down 1.30%), Cipla (down 0.98%) and Siemens (down 0.70%) settled at the bottom of the index.
Most markets in Asia closed higher on optimism that a solution to end the debt crisis in Europe is being drawn up. However, stocks in China closed at their lowest since March 2009, after local media reported a fall in property sales volumes during the Golden Week holiday last week, seen as a boom time for realty sales.
The Hang Seng added 0.02%; the Jakarta Composite gained 0.74%; the Straits Times climbed 1.06% and the Seoul Composite rose 0.38%. On the other hand, the Shanghai Composite fell 0.61% and the KLSE Composite lost 0.21%. Markets in Japan and Taiwan were closed for a local holiday.
Back home, institutional investors—foreign and domestic—were net buyers in the equities segment on Friday. Foreign institutional investors infused Rs491.55 crore into stocks and domestic institutional investors pumped in Rs19.41 crore.
Global consultancy and IT services provider Mahindra Satyam (Satyam Computer Services) has partnered with iPipeline, a specialist in providing innovative marketing, selling and processing solutions to the banking, financial services and insurance and markets. As a part of the partnership Mahindra Satyam will position iPipelines customer relationship management (CRM) tools for financial services to banking and financial services clients in West Asia, besides the Asia-Pacific and India markets. Satyam gained 3.85% to close at Rs70.15 on the NSE.
Jindal Power (JPL), a subsidiary of Jindal Steel & Power, has sought a no objection certificate (NOC) from the coal ministry for the proposed expansion of its thermal power plant in Chhattisgarh at an estimated cost of Rs13,410 crore. The company has sought the NOC as the existing plant at Tamnar, in Chhattisgarh, is situated over a coal-bearing area having reserves of about 50 million tonnes. Jindal Steel & Power lost 1.70% to settle at Rs475 on the NSE.
Onco Therapies, a wholly-owned subsidiary of Strides Arcolab, has received US Food and Drug Administration (USFDA) approval for Cladribine Injection 1mg/ml packaged in 10mg/ml single dose vials. The US market for generic Cladribine is about $5.3 million with only one major player.
Cladribine is a part of the oncology portfolio licensed to Pfizer in January 2010 for the US market. The product is expected to be launched shortly. Strides settled at Rs343.60 on the NSE, up 0.38% higher.