Money & Banking
When Bank of Baroda goofed up on Mallya's loan guarantor
An internal enquiry by Bank of Baroda (BoB) in freezing the accounts of a marginal farmer in Uttar Pradesh for being a 'guarantor' to the Rs 550 crore loan it gave to tycoon Vijay Mallya revealed that the state-run bank had mistaken the farmer to be the real guarantor, who goes by the same name.
 
Investigation by leading news portal 'FirstPost' found how casual the country's second largest public sector bank was in lending and recovering loans doled out to corporates like Mallya's defunct Kingfisher Airlines Ltd.
 
Though the bank tried to cover up its blunder of mistaken identity as a 'technical error', the inquiry found how the bank failed to be commercially prudent while lending to Mallya's airline.
 
As reported by FirstPost on Thursday, the bank on December 15, 2015 froze the twin accounts of Manmohan Singh, a 52-year-old farmer of Khajuria Naviram village in Pilibhit district of Uttar Pradesh, who had taken a Rs 4 lakh crop loan from its rural branch at Nand, for being a 'guarantor' for the Rs 550 crore loan Mallya raised to fund his airline.
 
"We had never ever heard the name Vijay Mallya before that. After running around the bank branch for six months, we had to go to the media for help. Within a week of the news hitting national headlines, our accounts were re-activated (May 26, 2016)," Manmohan's younger son Harvindar, 22, told FirstPost.
 
As the news of a marginal farmer's accounts being frozen for being a 'guarantor' to Mallya's loan spread, the bank admitted to the inadvertent mistake.
 
In the course of investigation, FirstPost found in Manmohan's house a letter from the bank's Nariman Point office to its concerned branches, in which nine persons were listed with their names, account numbers, location of accounts and balance therein as directors/guarantors of the loan.
 
"The first four were Vijay Mallya and three of his relatives. 'Manmohan' figured fifth on the list. While all the Mallyas have their accounts in Mumbai, Bengaluru or Vadodara, Manmohan is the only one off the grid," the portal reported.
 
When asked how a small farmer from a Pilibhit village could be a 'guarantor' for Mallya, one of the bank's officers said that action was taken against Manmohan not as a 'guarantor' but as a director' (of Kingfisher Airlines).
 
When the national media reported that Manmohan became 'guarantor' due to a technical glitch, the bank clarified that Manmohan was wrongly proceeded against, but did not dispel the public perception that he was actually penalised for being a 'director' on the Kingfisher board.
 
A look at the Kingfisher board of directors list, filed with the Registrar of Companies (RoC), revealed that among the seven directors, including Mallya, was 'Manmohan Singh Kapur', a well-known name in banking circles, for his stint as chairman of the state-run Vijaya Bank from August 2002 to March 2006. He is also on the boards of other firms and lives in Mumbai.
 
To a questionnaire by FirstPost, the bank's corporate office admitted that the technical error occurred because of the "similarity of names".
 
Though Manmohan's 'directorship' on the Kingfisher board ended in over five months, freezing farmer Manmohan's accounts left many questions unanswered.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Param

11 months ago

kudos to the farmer for being aware of the power of media. one wonders the fate of those who do not know how to get justice outside of the judicial system...

B. Yerram Raju

11 months ago

When King Fisher was granted loan against the collateral of brand, who was the Chairman of the Bank? Who were the Director nominated by the government and the RBI? Why no action is initiated against these three in spite of proven loss due to bad credit origination? Why the consortium members at that material time endorsed this brand as collateral? How many such loans are there that were granted crores of rupees based on the brand? Why should not the RBI reveal these details so that the credit risk can be tackled more effectively by the present generation of boards and managements?

Dr Anantha K Ramdas

11 months ago

During the time when Vijay Mallya received financial support from Bank of Baroda, I wonder who was the Managing Director of this Bank? On what basis were the loans
and credits given? It would be interesting to find more details on this score. Simply put, who goofed in Bank of Baroda?

Gopalakrishnan T V

11 months ago

It is unbelievable that officials do not apply their mind when letters are issued , do not think on the subject matter and do not have any sense of the sensitivity of the subject. Vijay Mallya and his banks' dealings have been in the news for quite some time and officials involved in dealing with such sensational cases are completely ignorant of all these when follow up actions are initiated. From my experience, the banks' officials at several levels have no knowledge of both inside and outside developments in banking and they have no reading habit. They some how manage to do their daily routine work mechanically without any understanding of what they do . The technology has also become handy .This is perhaps one of the major reasons why the banks fail to transmit the monetary policy as except perhaps the top management and some senior level officials many do not understand the objectives of monetary policy , the role of credit in an economy, the implications of interest rates, etc. With the invasion of technology, the banking has undergone a sea change but the absence of human intervention essential to run banks efficiently and effectively has been creating catastrophe and needs to be fixed. Things were better when the banks officials used to have exposure to Central Bank training in Bankers Training College, Mumbai. Now the ground reality is that except the top management and some officials who take some personal interest to keep themselves up to date about the developments of economy , banking and finance , others have no knowledge even of the Presence of Reserve Bank of India, the advantages of having an effective credit management for the banks and the economy etc. Unfortunately ,RBI has also ignored the need to enhance knowledge, skill and expertise among bank officials. The stress was on the Risk management without understanding and recognising the major risk on banks through human resources. The greatest risk bank face these days is not on account of stressed assets but on account of human resources . Knowledge of banking is virtually absent among many a bank officials and unless and until this is adequately addressed, more such goofs can be seen in banks . But making the tax payers and depositors to foot the bill and make up for all the losses banks incur is too much and this cannot go on for ever. Many such goofs are hidden and the balance sheets are fudged and covered up.

SEBI cautions public to deal with only SEBI registered investment advisers and research analysts
Investors are advised to check the registration status of an entity/person on the SEBI (Securities and Exchange Board of India) website before availing investment advisory services/ research services. The general public has been cautioned to deal with only SEBI registered investment advisers and research analysts for availing investment advisory services/ research services, according to a release from SEBI. The details of SEBI registered investment advisers and research analysts are available on the SEBI website www.sebi.gov.in.
 
According to SEBI, the general public should also be wary of trading in the securities markets based on the tips/recommendations provided by unregistered entity/person and should not get attracted or lured by such trading tips and stock specific recommendations received through Short Message Services (SMSs). The same caution is required for tips obtained through public media including websites or through social networking media. Informed investment decisions should be taken by investors without being influenced by messages or by misleading advertisements through websites, mass messaging, emails and telephone calls, which solicit investments and/ or promise unrealistic returns.
 
Apart from cautioning investors, SEBI has also warned unregistered advisers and analysts. No person shall act as an investment adviser or a research analyst unless he has obtained a certificate of registration from SEBI. Acting as such without registration with SEBI may entail initiation of action as deemed appropriate under the SEBI Act, 1992. The list of entities against whom orders have been passed since September 2014 is given below:
 
 

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COMMENTS

Vijay Ramachandran

11 months ago

Pls confirm for capitalheight.com
Based in Indore , I keep getting calls for trying them out. Will someone let me know please.

Nilesh KAMERKAR

11 months ago

Not a word about how SEBI intends to deal with 'Non-performing RIAs'.

Non-performing RIA may be defined as those who fail to deliver over a 5 yrs period, at least as much returns as generated by a 5 yr SBI Fixed Deposit.

Vaibhav Dhoka

11 months ago

SEBI just give cautious note but dare not to act on complaints,the truth known to regulator itself.

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