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Bank of India links pay order scam to Ketan Parekh

Tamal Bandyopadhyay

Bank of India (BoI) has decided to take the bull by the horn. The public sector bank, which has lost Rs 1.30 billion in the Madhavpura Cooperative Bank pay order scam, has traced the orders to leading stock broker Ketan Parekh and is planning to file a criminal suit against him. The bank is also readying to refer the case to the Central Bureau of Investigation (CBI).

According to sources, three investment companies of Parekh, which run current accounts in BoI's stock exchange branch in Bombay, used pay orders worth Rs 1.37 billion to siphon off money from the bank. Classic Credit Ltd used pay orders worth Rs 650 million, Panther Investment Trade Ltd Rs 200 million and Panther Financial & Capital Manag- ement Rs 520 million.

The pay orders bounced on March 20. Parekh has paid off Rs 70 million leaving a wide gap of Rs 1.30 billion.

The bank top brass held a series of meetings with Parekh for the last two days and asked him to bring in collateral immediately or face legal action.

Parekh reportedly expressed its inability to furnish securities as collateral and has sought time to pay up which the bank is not willing to give him as the financial year is drawing to a close on Sunday. BoI will be left with no choice but to take the Rs 1.30-billion hit in its balance sheet for the year ending March 31, 2001.

When contacted, BoI chairman-cum-managing director KV Krishnamurthy refused to comment on the issue saying, "I cannot comment on this at this point," he said.

The BoI CMD held two rounds of meetings with Parekh on March 28-29 and told him point blank that the bank is contemplating legal action against him. Parekh is in no position to bring in fresh securities as income tax department has seized all his securities and frozen bank accounts. Parekh may not be in a position to pay as he has over-leveraged himself.

Parekh is also in no position to offer the erstwhile ICICI headquarters in south Bombay to BoI which the bank has asked for as collateral since the deal has not yet been struck. According to sources, five Parekh companies planned to buy six floors of the building at Rs 730 billion but the deal could not be struck as the state government has not cleared it yet.

Industry sources blamed RBI's clearing system for the BoI plight. "The set of pay orders were sent for clearing on March 9. The RBI reprocessed them on March 15 and finally sent them back on March 20-11 days after they were sent for clearing. By that time, BoI had already released the money," a source said.

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