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4 more Gujarat co-op banks may be hit

Joydeep Ray

The state co-operative department has asked for vital files and related documents from at least 12 banks based in south Gujarat over the last few days.

State co-operative minister Vadibhai Patel, who confirmed the investigation by his department, did not rule out the possibility of the involvement of few more banks in the gilts scam.

Sources in the department said:"Preliminary investigations have revealed that some banks' or their top officials who were handling money had been given additional brokerage as an incentive by Home Trade which might have led to the diversion into government securities."

In the first week of May, eight banks from south Gujarat only had lost about Rs 800 million in the scam and now, the involvement of four other banks is also being suspected.

While Valsad Co-operative Bank lost Rs 270 million, Surat Nagrik Sahakari Bank lost Rs 150 million, Navsari People's Co-operative Bank lost Rs 170 million, Surat Mahila Co-operative Bank lost Rs 80 million, besides losses by other banks such as Adajan Co-operative Bank, Gamdevi Co-operative Bank, and Karamsad Co-operative Bank.

In parallel to the investigations being carried out by the Reserve Bank of India and the Securities and Exchange Board of India, top officials of the co-operative department were assigned to investigate the case few days back, following which documents from the banks concerned are being scrutinised by the officials.

Already eight banks from south Gujarat have incurred losses in the scam taking the total amount involved to Rs 800 million.

"But still we have asked for papers from four other banks in this region only, as they might have lost some money in the Home Trade and now fearing pressure of an inquiry and government action have been trying to hide," a source in the department said on Thursday.

Even Patel admitted that officials from his department are on the investigation and banks, whose involvement have been found and being suspected, have been asked to hand over the related documents to the department officials.

"The investigation is being carried out in the top level and officers such as the state registrar of cooperatives and his deputy have been given the charge of the investigation. There is some development in the investigation already and right now, my officers are screening more documents in these banks to dig deeper," Vadibhai said.

When asked about possibility of involvement of few more banks in the gilt scam, he said, "Thus far, there is a strong possibility but let us complete the job and then we can give you a detail picture." "Whatever the outcome is in the investigation, we are going to take stern actions against the banks or any of their officials found guilty and involved in the scam," assured the minister.

Meanwhile, a source in his department said, "The way Home Trade created an impression in the market through its huge budget advertisements involving stars, the small co-operative banks easily fell prey. If not, then some influential people inside these banks acted in connivance with the company and handed over the money."

"We suspect the involvement of a number of such persons from these banks who played a major role in this scam," the source said.

Chinubhai Shah, president of the Gujarat Investors and Shareholders Association, said, "The way these co-operative banks are functioning with some obnoxious elements inside, we will ask the government to hand over total control to the RBI only to protect the interest of depositors. We are still to know how many banks have fallen into the trap of Home Trade and what will happen to these depositors."

However, the state registrar of co-operatives, R M Joshi, and his deputy, D P Joshi, could not be contacted for their comments on the issue as both are on leave till the first week of June.

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