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Government-owned UCO Bank told the stock exchanges on Monday it had already provided Rs 7.57 billion on its balance sheet as provisioning against a bad loan account involving its former chairman, Arun Kaul.
During the weekend, the Central Bureau of Investigation (CBI) booked Kaul, the lender’s former chairman and managing director (CMD), and some others in connection with an alleged Rs 6.21 billion loan fraud. This, in turn, is supposed to have caused a loss of Rs 7.37 billion to the bank.
UCO Bank says the account in question was classified as non-performing since July 1, 2013.
It had registered a complaint with the CBI last Wednesday, against Era Engineering Infra India (EEIL), in view of the irregularities reported in the account, the bank said.
CBI had searched 10 locations in Delhi. Besides Kaul, it has booked EEIL, the latter’s chairman, Hem Singh Bharana, and two chartered accountants (CAs), Pankaj Jain and Vandna Sharda. Also, Pawan Bansal of Altius Finserve, among others.
Fraud of Rs 6.21 billion by diversion and siphoning off the bank loans is alleged. Kaul was CMD of the Kolkata-based bank between 2010 and 2015. He is alleged to have facilitated the company in getting the loan. Another charge is that the loan was secured by producing false end-use certificates issued by CAs and by fabricating of business data. And, the money was not utilised for the sanctioned purpose, CBI has alleged.
In its complaint, the bank said two loans were issued to the company in 2010, of Rs 2 billion and Rs 4.5 billion. The Rs 2 billion was issued for repayment of higher cost debt to Central Bank of India, Punjab National Bank (PNB), and IFCI. It is alleged the company diverted the funds and no money was repaid to Central Bank of India or PNB, while only Rs 5.9 million was paid to IFCI.
The bank’s share price fell 18 per cent in morning trade. It finally closed at Rs 20.85 on the National Stock Exchange, down 6.3 per cent.