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Money > Business Headlines > Report May 3, 2002 | 0900 IST |
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RBI steps in to stem gilts scamBS Banking Bureau The Reserve Bank of India on Thursday directed the Registrar of Co-operative Societies to supersede the board of the scam-tainted Nagpur District Central Co-operative Bank and appoint an administrator. This is the first instance of the board of a co-operative bank involved in the government securities scam being superseded. Last year, the RBI superseded a few co-operative bank boards for their involvement in the stock scam. The chairman of the bank and a prominent leader of the Nationalist Congress Party in Maharashtra, Sunil Kedar, had earlier lodged a complaint with the police in Nagpur, stating that the bank had not received delivery of government securities worth Rs 1.26 billion. The police slapped charges under Sections 406, 420 and 34 of the Indian Penal Code against broking firms Home Trade of Navi Mumbai, Indramani Merchants Pvt Ltd and Century Dealers Pvt Ltd of Kolkata, Syndicate Management Services Pvt Ltd of Ahmedabad and Giltedge Management Services of Mumbai, which had "defaulted on their commitments". The Registrar of Co-operative Societies and Nabard have completed investigations into the matter. Nabard has submitted its report and the RBI's move is based on it. An RBI team is currently in Nagpur, investigating the banker-broker nexus that made a Rs 1.25 billion hole in the Nagpur bank's balance sheet. The bank invested around Rs 1.50 billion in gilts through some Mumbai-based brokers, circumventing the more secure subsidiary general ledger route. The system is safe and there will not be any changes in the rules to curb co-operative banks' exposure to government securities. It was a case of fraud, and the RBI took the necessary steps to tackle this, sources said. In its credit policy on April 29, the RBI directed regional rural banks to keep their subsidiary general ledger holdings in government securities to deepen the gilts market by increasing the number of players. Apart from the Nagpur bank, a few other co-operative banks have been found indulging in fraud by buying illiquid securities. However, the magnitude of the fraud at the Nagpur bank was much higher because it did not receive delivery of any of the securities it had paid for, sources said. ALSO READ:
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