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.”
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through RTI the susceptibility of the system is proved by me in the RBI But even the media do not have the guts to take on the banks.
i am an uncompromised intelligence reporter of the dhanalakshmi bank since 1976 exposed corrutpion
The management does not want to meet us. That usually happens when they have something to hide. As we have repeatedly pointed out, they did not answer any specific question and resorted to the most ludicrous evasive responses. Are you a shareholder? If you are anguished in your capacity as an investor, I would strongly advocate that you question the management and ask them why they failed to respond to our questions for over two weeks. Even before publication we wrote to them ONCE again asking if they wanted to change their mind and answer questions. They said NO.
So where is the question of a corrigendum? Do you have some facts that are not in the public domain? If yes, let them be provided to all investors. Otherwise, I am afraid you sound like the voice of management.
In fact, our report stuck to only those issues raised by the Officers Union - while we had posed several more queries to management.
The bank's response was to arrogantly refuse to answer and to subtly threaten us.
They were given more than two weeks of time and before publication, we wrote to the bank once again to ask if they wanted to change their mind.
It is disgusting that listed companies should react only when the stock price has fallen and the story is picked up by mainstream media.
That is fine by us, but to post comments to discredit our writing is not acceptable.
As for the RBI - even in the Corporation Bank case we repeatedly asked them about charges against the Chairman. The RBI did nothing. Finally it was the CVC that initiated action.
So we wouldn't read too much into the RBI's silence.
Remember they were silent and in fact supportive of Global Trust Bank despite its openly known shenanigans with Ketan Parekh, right until the day it collapsed. And this was under a powerful RBI Governor!
Suchet a
Dhanlaxmi Bank today reiterated that all such allegations are baseless and represent a motivated attempt by one of the employee associations de-recognized by the Bank.
The association has accused that the Bank has borrowed high cost funds in the form of Certificate of Deposits of about Rs 2,500 crore, whereas the fact is: The Bank has a limit of raising Rs 1,500 crore through Certificate of Deposits. There are multiple examples of such falsification of accounts by the association.
The Indian banking system in general and the private sector banks in particular, including Dhanlaxmi Bank, are subject to healthy supervision in the form of regulations from the Reserve Bank of India. In fact, the apex bank in May 2011 conducted and completed the Annual Financial Inspection of the Bank's overall performance.
Moreover, the central bank only last week also granted the Bank's MD & CEO, Mr Amitabh Chaturvedi, a second term of three years. The re-appointment is an affirmation of the fact that the audits and inspection into the Bank's books have found nothing amiss.
In the past three years, the Bank has witnessed excellent growth and healthy financials with deposits growing from Rs 3,608 crore in FY08 to Rs 12,530 crore in FY11 (247% growth) and loans from Rs. 2,102 crore to Rs. 9,065 crore (over 330% growth). This performance bears testimony to the support and the confidence the Bank enjoys from its customers, regulators and other stakeholders.
It is pertinent to mention that the number of employees in the said association is minuscule and is currently less than 10 % of the bank’s workforce. The campaign therefore seems to be the handiwork of some misguided employees and some rank outsiders who have no stake in the well-being of the institution.
This is an illegal and unscrupulous tactics to defame the franchise of the bank.
I think these kind of allegations are not to be given any kind of attention/importance. I believe there are some bad, crooked intentions behind the same. Dhanlaxmi Bank is being regulated by RBI, and so is the industry as a whole.