Will whistleblowers’ missives work?
Even as Subrata Roy is working on a 15-day extension to meet the Supreme Court’s condition to release him from jail, a whistleblower has, after many efforts, managed to catch RBI’s attention on the issues at Sahara India Financial Corporation Limited (SIFCL).
This is a residuary non-banking company which is under RBI supervision. SIFCL was barred from accepting any fresh public deposits in June 2008 and asked to repay existing deposits as and when they mature. In 2011, RBI issued a notice warning depositors about Sahara which also said it would not guarantee repayment of deposits by SIFCL or other group entities. A similar warning was issued by the market regulator.
Little information is available in the public domain about SIFCL, except a fact sheet which says that one Mr Madhukar and BM Chaturvedi are independent directors and Om Prakash Srivastava is a whole-time director of the company as of 5 September 2014. This means that Subrata Roy, who was the chairman of SIFCL, has also stepped down and there is no immediate family member on the board. Nobody is designated chairman either.
This means that the two independent directors, Mr Madhukar and Mr Chaturvedi, who are accused by the whistleblower of colluding with various entities to sell off assets belonging to depositors, form a majority on the board. He claims in a letter to RBI that over Rs500 crore had already been diverted until September this year. The whistleblower also alleges that the two independent directors have been improperly appointed without seeking prior approval from RBI.
Who are these directors? Mr Madhukar is on the board of several Sahara group companies including its mutual fund and Sahara Infrastructure & Housing Limited (SIHL). More importantly, he is a former whole-time member of the Securities & Exchange Board of India (SEBI) and former chairman of United Bank of India.
Mr Madhukar’s faith in Sahara and loyalty to the pariwar seems unshakable, despite all the allegations against the group. He has stayed on, even when another loyalist, Amitav Ghosh, a controversial former deputy governor of RBI, stepped down as independent director on the SIHL board in April 2013 (well after the path-breaking Supreme Court order asking two Sahara group companies to refund Rs25,000 crore raised through hybrid convertible bonds without SEBI approval). Mr Madhukar stepped in to replace by Mr Ghosh on that board.
On 20th August, RBI’s Kanpur office wrote to the whistleblower that the “two issues flagged by you are being examined by our Central Office at Mumbai.” It remains to be seen if RBI will act in time or take shelter behind a long-drawn ‘examination’ of issues. The whistleblower’s emails seem to suggest that nothing has changed at Sahara pariwar.
As for RBI, the stringent action by the Supreme Court has apparently not made this regulator more vigilant about the goings on at this controversial group.
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Why they are after such great person.
He started as a probationary officer in State Bank of India as early as 1967, became MD of State Bank of Bikaner & Jaipur in March 2000 and CMD of United Bank of India in July 2001. In SBI he had assignments in Europe, West Asia and Africa for nearly 10 years, got out of turn promotions. When he accepted the United Bank of India, a few warned him against taking up the assignment as the bank had already been written off by various experts within the government and outside.
"The challenges were formidable. On the one side, there were 18,000 employees, a demoralised lot at that, and on the other end, he was fighting a lone battle. Even the Ministry declined any financial support and he took up the challenge.
United Bank of India was promoted by a group of individuals mostly based in the erstwhile East Pakistan and with the Partition, the bulk of the business was off. At the initiative of the then Chief Minister, Dr B.C. Roy, United Bank was created through amalgamation of a few small banks. More than 80 per cent of its branches were located in areas known for their backwardness.