Syndicate Bank Balance Sheet Fudged

The Reserve Bank of India may penalise the Syndicate Bank for indulging in window dressing of its 1995-96 balance sheet that resulted in a loss of over Rs 2 crore.

We are scrutinising the report submitted by our inspectors to fix the penalty. We will also direct the banks management to initiate action against the erring officials, said a Reserve Bank official. It has been brought to the notice of the RBI that the management of Syndicate Bank has since promoted the chief manager concerned, despite the RBI inspection report pinpointing the lapses some time ago.

A regional inspection report of Syndicate Bank prepared by the Reserve Bank inspectors in December last year had unearthed how the bank had window dressed its balance sheet and the resultant loss to the bank.

 

The report said grave irregularities were committed by the bank, which is the banker to the Union ministry of shipping and surface transport.

The government had entered into an agreement with Japan for an import credit of 992 million yen in June 1993.

Under the agreement, the director general of shipping, Mumbai, had availed of a yen credit of 859.49 million for acquisition of one set each of engine room simulator and cargo handling simulator from Japan.

The Indian government had named the Tokyo branch of Bank of India as the bank that would pay the suppliers of the equipment by a finance ministry order: AA/11/(9)/Japan/Ga/859.490 million /94 dt.7.3.94.

Copies of this order were marked to the director general of shipping and the Fort branch of Syndicate Bank for further action.

As stipulated, the Bank of India branch in Tokyo paid the two Japanese suppliers in January and March 1994. Under the agreement between the two governments, the funds were reimbursed by the Japanese government.

The Fort branch of Syndicate Bank had by then sent it to the drawee bank, the Tokyo branch of Bank of India.

It was at this juncture that the irregularities were committed by Syndicate Bank. On April 4, 1994, the directorate of shipping, through letter 22-TR(2)/87-VI, made payments in Indian rupees equivalent to the yen credit availed already.

The amount Rs 28.38 crore credited to Fort branch of Syndicate Bank by the director general of shipping, should have been immediately deposited by the branch with the Reserve Bank or State Bank of India, New Delhi, as directed by the ministry of economic affairs and the Syndicate Bank headquarters.

The Fort branch however kept Rs 28.38 crore in its custody for six more months under Bills Margin, which attracts provisions of the statutory liquidity ratio and credit reserve ratio.

Thus, the banks deposit level on the date went up by Rs 29 crore, even as the bank stood to lose Rs 2 crore, the Reserve Bank of India report said, as and when the ministry of economic affairs claimed interest for the delay period at the prime lending rate of 15 per cent.

Apart from the loss of Rs 2 crore, said the Reserve Bank of India report, Syndicate Bank would face action for window dressing its balance sheet in general and deposits in particular.

The bank may also face a claim by Bank of India, the forwarding bank, at a later stage.