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Money > Business Headlines > Report March 31, 2001 |
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RBI asks BoI to explain pay order scamBS Banking Bureau The Reserve Bank of India (RBI) on Friday turned the heat on the Bank of India (BoI) which lost Rs 1.30 billion in the Madhavpura Mercantile Cooperative Bank pay order scam, and filed an FIR against stock broker Ketan Parekh with the Central Bureau of Investigation (CBI). The central bank has dashed a note to BoI asking the management to explain what went wrong and how it got embroiled in the scam. Prima facie, the RBI has found that BoI failed in risk management. "The bank should have taken adequate precaution before taking such a huge exposure against a small cooperative bank," said an RBI source.Industry sources, however, blamed the apex bank for its failure in market intelligence. "There is nothing abnormal about taking exposure against a scheduled bank. The RBI has failed to anticipate the magnitude of the situation," the sources said. RBI sources also said BoI management was told on March 12 not to discount any pay order of Madhavpura Mercantile Cooperative Bank and that all the instruments would be returned by the clearing house as Madhavpura does not have funds to honour them. "Despite that BoI went ahead and released money. This is a failure of the risk management," the sources said. In a swift move, BoI has transferred the chief manager of its Bombay Stock Exchange branch, V H Somaiya, to the recovery cell. The chief manager of the branch holds the rank of an assistant general manager in BoI's cadre. Ketan Parekh ran three current accounts here -- Classic Credit Ltd, Panther Investment Trade Ltd and Panther Financial & Capital Management -- which were used to siphon off Rs 6.60 billion to Nakshatra Software Pvt Ltd, Chitrakoot Computers Pvt Ltd and Goldfish Computers Pvt Ltd. ALSO READ:
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