The Chaos He Presided Over
Bank would repay the money with interest if National Housing Bank won on appeal.
Now Mr Venkitaramanan has come out in support of National Housing Banks case. According to him, there was no practice of crediting bankers cheques to the accounts of the brokers who brought them; that such an act needed to be approved by an accounts/branch manager to be valid, which it was not in ANZ Grindlays; and that if such a practice were condoned: We will face chaos.
On April 30, 1992, a week after he became aware of the diversion of bank funds through ready-forward deals routed through brokers, Mr Venkitaramanan appointed a committee to enquire into the securities transactions of banks and financial institutions. The committee submitted the first interim report within four weeks. According to this report, account payee cheques issued by National Housing Bank to State Bank of India and ANZ Grindlays Bank were also credited by them to Harshad Mehtas account. The National Housing Bank was not the only operator to follow this practice; so did SBI Capital Markets. On the basis of these and other transactions, the Janakiraman Committee concluded within days of starting work that: Banks have lent their names to transactions which are not on their own account. The subsequent reports of the Janakiraman Committee are replete with instances of this practice. These were, of course, early findings, and Mr Venkitaramanan may have disbelieved them. But on the orders of the Joint Parliamentary Committee, the RBI set up an inter-disciplinary group for tracing end-use of funds involved in the problem exposure of banks and financial institutions. This group had the resources of both the RBI and the custodian at its command, and went through every transaction with a tooth-comb. According to this group, which reported in December 1995, the normal practice was for a broker to maintain a current account with the routing bank which would issue bankers cheques and RBI cheques to other banks and debit his account, and credit to his account similar cheques he brought. Thus it would seem that the ex-governor is inveighing against the overwhelming weight of evidence which was available to him all the time.