Bank sanctioned Rs 701 crore loans without documents: RBI

BENGALURU: Sri Gururaghavendra Sahakara Bank Niyamitha is staring at a shutdown with the Reserve Bank of India finding out that it has given away loans worth Rs 701 crore without any documents.
Acting on RBI orders, the state government appointed an administrator for the bank superseding its board of directors. The Registrar of Cooperative Societies in Karnataka named AC Diwakara, additional registrar in the department, as the administrator for one year to ensure proper management of the bank.The intervention came after RBI found misappropriation of funds by the bank directors, including the president and vice-president.
RBI inspection revealed there were 1,602 fictitious loan accounts totalling Rs 701 crore and the money was used for creation of fake deposits and to divert funds to certain societies and individuals. There were 41 major beneficiaries of such transactions.
As many as 2,876 accounts amounting to Rs 1,544 crore did not have any records or securities, but were mentioned as secured loans as per the Core Banking System (CBS). The report said the bank had created artificial deposits over a period of time by way of debiting loans and advances with a view to present financial growth. But it was revealed that the bank's negative net worth (Rs 1,141 crore) as on March 31, 2019 was at a huge variance with the positive book value at Rs 168.71 crore. The assessed Capital to Risk Assets Ratio stood at (-)582.79%.
The bank also admitted that deposits equivalent to Rs 149 crore pertaining to 60 customers were fictitious.
Plaints against directors
RBI on January 10 capped withdrawals from the bank at Rs 35,000 for six months over non-performing assets. Multiple complaints were filed against Vasudev Maiya, then chief adviser, and other directors. The bank had set a target to recover Rs 385 crore from borrowers, but it failed to do so.
The Basavanagudi-headquartered bank, which started operations in 1997, has 35,000 customers, mainly senior citizens, in its nine branches.