Gold Bond Encashment Fraud Unearthed

A major case of fraudulent encashment of national defence gold bonds (NDGB) amounting to a staggering 41.2 kgs of gold worth about Rs 1.86 crore has been detected at the Public Debt Office (PDO) of the Reserve Bank of India (RBI) in Mumbai, six years after the sensational swindle actually occurred. The RBI has now handed over the case to the Central Bureau of Investigation (CBI).

The story begins in 1990. On February 14 that year, Narendra Singh and his wife Bhanu Prakashini Singh of Calcutta died in an air crash at Bangalore. The couple held six NDGBs each, which were due for redemption from October 10, 1980.

 

The couple had not claimed the redemption value of the bonds in a long time, but had, before their death, endorsed the 12 bonds in favour of Dena Bank, presumably, to obtain guarantee. The bonds were later re-endorsed by the same bank in favour of the original holders on April 30, 1991, after the couples death.

The action, thereafter, shifts to the RBIs PDO in Mumbai. The 12 bonds collected from Dena Bank were lodged with the PDO in two lots on June 14, 1991, and July 3, 1991 against which delivery orders (DO) and interest warrants were issued after processing the case. The payment of the maturity value was made in gold to a person claiming to be Narendra Singh on July 2, 1991, and October 1, 1991. The NDGBs held by Bhanu Prakashini Singh were also collected by one N Singh on the basis of an authorisation letter by B Singh.

The matter would have ended there, but for an anonymous letter addressed to RBI governor C Rangarajan, which said the couple had died long before the bonds were redeemed and, hence, the person who had collected the maturity value of the bonds posing as N Singh was obviously a crook who had duped the RBI.

In reply to a confidential enquiry by the RBI, the PDO replied that there had been no deviation in standard procedures while paying the redemption value of the bonds. Further, the PDO claimed to have no record or information about the death of the Singh couple.

Surprisingly, the matter was closed after this and things cooled down... till the conscientious letter-writer fired off another salvo to the RBI Complaints Redressal Cell on October 14, 1996 (five years after the fraud took place), this time giving more details about the swindle.

As per the anonymous letter, the fraud was committed by Rajendra Singh and Mahendra Singh (nephew and brother of Narendra Singh) and the gold was kept in a locker of a public sector bank. The case was reopened. Enquiries made and an inspection ordered onto the records of the Calcutta branch, Howrah central branch, and Dalal Street branches of the Dena Bank as the fraud seems to have begun here when the bonds were handed over to the perpetrators of the fraud.

According to the preliminary report of the inspection department of the RBIs central office, there were gross irregularities in establishing the identity of the persons who collected the payment of the bonds. The standard norms were not followed.

Interestingly, except for this case, in no other case has the attestation of a Notary Public been accepted as enough identification for the person/s receiving gold of such a large amount. The inspection report says that an exception to the laid down norms has been deliberately made to facilitate the imposters to defraud the bank. The report also says: The possibility of connivance/collusion of the officials of PDO, Mumbai, in effecting deliveries of huge quantity of gold... cannot be ruled out.