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Govt smells Rs 436-cr scam, starts forensic audit of Dena Bank, OBC

The government has initiated a forensic audit at state-run Oriental Bank of Commerce (OBC) and Dena Bank after the unearthing of a suspected scam, wherein the lenders allegedly misappropriated funds worth Rs 436 crore from their fixed deposit customers. ‘A forensic audit has already been ordered,’ Financial Services secretary G S Sandhu told reporters here on Wednesday, when asked about the alleged scam, adding some suspensions have been initiated by the authorities in this regard.

He, however, was quick to add that it is a case of aberration at the individual officer level and not systemic. ‘These are instances which have happened at the lower level, at the branch level because of lack of due diligence or non-adherence to the norms and procedures,’ Sandhu said. The lenders are alleged to have indulged in siphoning off the money (Rs 180 crore by OBC and Rs 256 crore by Dena Bank) received as fixed deposits.

‘Persons responsible are being taken to task, there have been some suspensions, transfers, and the investigations are on,’ Sandhu told reporters at an event organised by real estate body Nardeco. The Finance Ministry official added that the government has also flagged the issue of risk management by state-run banks, saying deputy GM and GM-rank officers will have to undergo a course on risk management before being considered for promotion.

Shares of Dena Bank and Oriental Bank of Commerce (OBC) plunged up to 5 per cent on the news. Dena Bank’ scrip tumbled 5.06 per cent to Rs 60.10, while shares of Oriental Bank of Commerce fell by 3.63 per cent to Rs 264 on the BSE.

Meanwhile, in a clarification to the BSE Dena Bank said on Wednesday that the Malabar Hill Branch of the bank received bulk term deposits from various entities/government organisations between January 30, 2014 and May 5, 2014. Subsequently, term deposits amounting to Rs 256.69 crore were pledged to the bank by the same signatories to obtain overdraft facilities of Rs 223.25 crore (present outstanding 217.17 crore).

The funds were surreptitiously transferred out of the bank by creating fake overdraft facility, resulting in a fraud on the bank and the concerned entities/Govt organisations. The bank has lodged complaint in this regard with CBI.

The bank has made a provision of Rs 54.29 crore during the quarter ended June 30, 2014 and the balance to be provided equally in subsequent three quarters of FY 2014-15. The bank has suspended the erring branch manager and transferred the staff of the concerned branch, it said.

The development comes within a fortnight of the arrest of Syndicate Bank CMD S K Jain for allegedly receiving Rs 50 lakh from Bhushan Steel and another company for expanding their credit limit. Newly appointed RBI Deputy Governor S S Mundra on Wednesday took serious cognisance of the matter.
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