How Corporation Bank Officers Forced the Management to Avoid this Huge Bad Loan Possibility
On reading the unfolding new drama of another big loan fraud on the Indian banking sector, I recalled the Aesop’s fable about a boy who became a big thief.
He was to be executed for his crime. In deference to his last wish his mother was produced before him. He told her that he would like to whisper in her ear; when she was close to him he severely bit her ear. Called upon to explain his inhuman conduct he responded: ‘when I stole small things in my younger days she did not reprimand me; rather she partook of the spoils. Had she disciplined me I would have been a different man today.’
In the beginning of 2000, when I was President of Corporation Bank Officers’ Organization (CBOO), a colleague from a western India branch of the bank called me up to apprise me of a development in the account of a corporate client. Against a sanctioned cheque-purchase limit of Rs1 crore, the company would too frequently deposit cheques worth five times that limit.
They were always for round amounts and issued by unknown and unapproved entities. He and his manager felt that the firm was indulging in kite-flying and were worried that the bank would run a risk. Upon briefing the bank’s zonal head about the questionable conduct of the account, he overruled their apprehensions and advised them to continue to accept such cheques beyond the sanctioned limit.
Uncomfortable with his advice, the officers wanted us to take up the matter with the top bosses of the bank. Their concern could be ignored at a great risk to a small bank of our size at that time.
Next day, accompanied by DN Prakash, the General Secretary of CBOO, I met the chairman and managing director (CMD) of the Bank. We apprised him about the case and requested him to initiate appropriate action to safeguard the bank’s interest. He assured to act.
At that time, the posts of CMD were clubbed into one and he was the chief executive (CEO). Now it is split into a non-executive chairman and a whole-time managing director who is the CEO.
Days passed with no movement at the corporate office. Meanwhile, the officers in the branch were under tremendous tension. Torn between the pressure and their conscience they contacted us again with more updates, which were worrisome.
Left with no choice, we tried to confront the CEO for the inaction. He was annoyed at our literally barging into his chamber. Armed with the latest facts, we demanded the suspension of the zonal head who was apparently hand in glove with the client.
The CEO appreciated our persistence and apologised for his tantrums but said suspending a senior official would scandalise the Bank. Instead, he would be removed from the operations pending investigation and formal disciplinary proceedings. The executive was shifted to the corporate office immediately.
When I briefed our doughty colleagues about the development, they shared some new information. The company had approached a private bank for credit facility to enable it to clear the liabilities of our Bank.
The CEO of that bank was a senior colleague of mine known for his uprightness. I called and cautioned him about the risk his bank would run if the company’s application for credit limits were approved. A few days later, he came back to me to confirm that the company’s application was turned down by his bank and thanked me for forewarning him.
In the meantime, a director of the company flew to Mangaluru to meet the Bank’s CEO seeking three months’ time to clear his company’s liability. It was granted. Within next six months, the company cleared all its dues to Bank. The colleagues thanked us for our timely intervention. The company thereafter moved to other banks.
The name of that company was, Sterling Biotech!
The series of media reports about the fraud Sterling Biotech has now allegedly perpetrated on a consortium of banks led by Andhra Bank and the stories of the vanishing trick played by its directors who, I learn, have left India, made me do a little bit of rewinding and talking again to the old colleagues who helped us blow the whistle in 2000.
The CEO superannuated three months later and he is no more. The zonal head in question was later rehabilitated by a new CEO. In due course, he became a top executive of the Bank. If age were with him, he would have become executive director and possibly managing director of another bank.
The former CEO of the private bank now lives in Mangaluru. When I spoke to him about the developments, he gratefully recalled my advice for helping his bank.
Sandesara brothers of Sterling Biotech, like Vijay Mallya, Nirav Modi and Mehul Choksey symbolise a malady that afflicts our financial system. The system ignores the early warning signals.
The promoters fly high, impress the bankers with an aura of ‘go-getters’ and evolve an immunity system around them so that their initial forays into the world of crony capitalism are treated as symbols of dynamism. Bankers get quick returns and, some gain personally.
If the situation becomes too hot, they will resort to fire-fighting but without imbibing the lessons from such experience or sharing the lessons with peers. Very often, it is easier to find scapegoats so that the real actors get out of the picture.
I have documented the episode in my autobiographical book in Kannada, Sangharshadinda Samarasydedege (From Conflict to Harmony), published in 2015 by Navakarnataka Publications Pvt Ltd, Bengaluru (Pp.141, 142). As the colleagues were still in service at that time I did not disclose their names and of the client. My anxiety was they could be hauled up under the archaic fidelity rules, which proscribe the bank employees from disclosing the names of clients to the outsiders.
If there are whistleblowers, they might themselves become targets of reprisal as happened to Devidas Tuljapurkar in Bank of Maharashtra (2013) or PS Rajagopal in Canara Bank during late B Ratnakar’s time (1986).