New Delhi: A number of public sector banks are now set to face heat as the Serious Fraud Investigation Office (SFIO), which is probing the Bhushan Steel Case, has asked the Department of Financial Services (DFS), the Reserve Bank of India (RBI) and the Central Bureau of Investigation (CBI) to act against over a dozen lenders for their alleged involvement in financial misappropriation carried out by the company’s promoters.
Which banks have been charged by SFIO?
The report submitted by the investigation agency, which runs into 70,000 pages, charges officials from 13 banks, including State Bank of India (SBI), Punjab National Bank (PNB), Allahabad Bank, Andhra Bank and Oriental Bank of Commerce, and Life Insurance Corporation (LIC).
The report charges officials of acting hand-in-glove with the Bhushan Steel promoters and has hinted that 200 or more officials could be involved in the alleged misappropriation.
A source said, “SFIO has filed prosecution case against the SBI general manager, the current PNB executive director and the managing director of Life Insurance Corporation, who was nominee director in Bhushan Steel and part of the board of the company.”
The many levels of the fraud
The SFIO report has highlighted the wrongdoing at multiple levels, including that of the top management, in the handling of a multi-bank loan to Bhushan Steel. “Basically the banking fraud has happened at two levels. One at the operational level, and another at management level – to cover up the operational fraud in the form screening committee meetings and the Joint Lender Forum submitting its response to RBI seeking closure of the forensic audit, suppressing material facts made out in the report,” the SFIO report said.
Fraudulent use of 1,600 LoC
It details the fraudulent use of 1,600 letters of credit (LoC) that amount to Rs 45,000 crore, and the overvaluation of assets by Rs 15,000 crore.
“In this case, 13 banks were part of the Joint Lender Forum. The banks whose officials’ role clearly came out in this report are State Bank of India (SBI), Punjab National Bank (PNB), Allahabad Bank, Andhra Bank and Oriental Bank of Commerce,” said another source.