Charminar Bank Scam: Bank is dead but its scams are not

2005
By Syed Akbar
Hyderabad, Dec 19: The Charminar Bank is dead but its scams are not. A fresh scam has been unearthed even as the State government is gearing up for speedy recovery of dues from major defaulters through public auction of their properties.
According to sources, an official in the recovery cell of the scam-tainted Charminar Bank has "short calculated" interest on the principal amount borrowed by an industrialist.
And when the Bank decided to take punitive action against the erring official, a senior minister and a senior official in the Registrar of Co-operative Societies (RCS) brought pressure on the management to hush up the case. The management simply washed off its hands by transferring the official and ordering an inquiry.
Sources said bank official Mehdi Hussain Jaffry had short calculated interest to the tune of Rs 30 lakh on a principal amount of Rs 5.3 crore borrowed by industrialist Virender Giri in the name of five different companies owned by him. Instead of showing Rs 6.10 crore as outstanding balance against Giri's companies, the official showed Rs 5.8 crore in the balance sheet.
The irregularity came to light during the meeting of the bank's managing committee held on December 9. The bank officials immediately decided to suspend Jaffry but adjusted it with a simple transfer following pressure from a senior minister. A senior official of the RCS is also said to be lobbyingthe case of Giri.
Charminar managing director V Prabhakar agreed that Jaffry had been transferred following detection of some irregularities. He, however, refused to divulge further information stating that an inquiry had been ordered and he would comment after the inquiry officer Bhadri Narayana submitted his report.
The minister and the RCS official are also reportedly bringing pressure on Charminar Bank to settle Giri's loans under One Time Settlement scheme. But the bank officials refused to take the case under OTS since one of the bank's directors had stood as a guarantor for Giri's companies. Under RBI rules such loans should not be covered under OTS scheme. A senior official who is retiring this month-end is said to be interested in the OTS scheme for Giri's company.
Charminar NRI Depositors' Association convener MA Taher demanded that the government should order a CID inquiry into the irregularity to bring out the brains behind the fresh scam. He wanted the properties of defaulters to be auctioned immediately to raise funds for distribution among depositors, due for March 2006 under the revival scheme.

Charminar Bank Scam: Recovery at snail's pace

2005
By Syed Akbar
Hyderabad, Dec 6: With the recovery from major defaulters going at a snail's pace, the scam-hit Charminar Bank may not be able to honour the State government's commitment of returning money to depositors from March next year.
The bank had refunded money to customers with deposits up to Rs 1 lakh after the State government worked out a revival scheme in association with the Reserve Bank of India. The State government and the RBI fixed a time schedule for refund of deposits over Rs 1 lakh in instalments starting from March 2006.
Though the first instalment is due in the next three months, the Charminar Bank has failed to speed up the recovery process to meet the deadline. The authorities are yet to recover more than Rs 200 crore from top 25 defaulters even two years after the revival plan scheme into effect.
In the initial stages, the CID could recover about Rs 100 crore from some of the defaulters but half of the amount went into the kitty of the Deposits Insurance Credit Guarantee Corporation as part of the revival scheme. The bank was left with Rs 50 crore and of this Rs 23 crore was disbursed among depositors with deposits up to Rs 1 lakh. It is mandatory on the part of the Charminar Bank management to deposit half of the recovered amount with the DICGC and disburse the remaining half among depositors.
The bank has to pay Rs 266.9 crore to depositors but is now left with just Rs 27 crore.
"Unless the authorities speed up the recovery we will not get our money back. The bank may manage to pay the first instalment in March but the problem becomes compounded when the second instalment becomes due in September," NRI depositors Association president Mohiuddin A Taher told this correspondent.

Krushi Bank scam: What happened to the money deposited by Charminar Bank in Krushi Bank?

Syed Akbar
Hyderabad, Dec 1: Charminar Bank never received Rs 38 crore it had 
deposited in the scam-tainted Krushi Cooperative Bank. It was only in the 
books of account that the deposits were withdrawn and encashed.
In a startling revelation, the auditors of Charminar Bank noted that the 
"transaction raises high suspicion about the genuineness of the receipts of 
cash and also their disbursement as loans".
The Charminar Bank simply made book adjustments showing that the Krushi 
Bank had repaid the cash deposit after it came to know that the Krushi Bank 
might collapse any moment under the impact of large-scale financial 
irregularities. The Charminar authorities, fearing that their murky financial 
dealings would be out once the Krushi Bank collapsed, made hurried entries 
in their records to show that Krushi had returned the deposit in instalments. 
But in reality Krushi Bank never repaid the money to Charminar. This simply 
means that the size of the scam in the Krushi Bank is Rs 73 crore and not just 
Rs 35 crore which the investigating authorities believe.
The murky dealings in the Charminar Bank came to light in the audit report 
carried out by chartered accountants Prema Gopal and Company. Charminar 
Bank has deposited with Krushi Bank in the form of fixed deposit Rs 38 
crore on July 29, 1998 and reportedly withdrew it in phases between March 
and August 2001. The Bank collapsed in mid-August 2001.
The State government has ordered an inquiry into the entire transaction 
between Charminar and Krushi Bank. Hyderabad district cooperative officer 
has been asked to submit report on the murky dealings. According to 
Charminar Bank managing director V Prabhakar, "the truth will come out 
when the DCO gives his report. We will initiate action accordingly".
The audit reports says, "entries were passed in the books of the Charminar 
Bank as if cash has been received from Krushi Bank by a particular branch 
on a particular day. these branches transferred the same amount on the same 
day to Purani Haveli branch. Again the same day the same amount was 
transferred to different branch/branches by Purani Haveli branch and those 
amounts were shown as given to different parties the same day as loans. The 
series of transactions, particularly in some cases with different denominations 
recorded in the books of different branches for the same amount on the same 
dates raises high suspicion about the genuineness of the receipts of cash and 
also their disbursement as loans".
According to the audit report cash was deposited by Krushi Bank in Purani 
Haveli branch without there being any account with the branch. Even the 
current account in the James Street branch was opened on March 27 a few 
days after the payment was said to have been made.
 The cooperative department is eagerly awaiting the arrest of Krushi chief K 
Venkateswara Rao, whose interrogation will bring the truth behind the 
Charminar-Krushi transactions.

Charminar Bank Scam: Bank fails to collect recoveries even after 40 months of scam

2005
Syed Akbar
Hyderabad, Aug 6: One hundred employees, Rs 10 lakh expenditure per month and not a single paise turnover for the last 40 months. This is the state of affairs in the scam-hit Charminar Bank which collapsed in February 2002.
The State government revived the Bank on March 3, 2003 but the ban imposed by the Reserve Bank of India on financial transactions had turned the revival package ineffective. Neither the State government nor the Charminar Bank had approached the RBI seeking lifting of the ban to enable the bank to do regular business.
The bank authorities spent Rs 4 crore on expenditure on various heads including salaries in the last 40 months without the bank having earned anything from fresh transactions.
The bank has so far recovered about Rs 120 crore from loan defaulters. Since its money is deposited in government securities, it cannot take up fresh lending and deposits or even loans against mortgage of gold.
Interestingly, Charminar Bank gets just 4.5 per cent interest on its investments made with the government/RBI while it pays 7.5 per cent to depositors.
"Charminar Bank is losing three per cent interest. A bank will run effectively only if the interest rate charged on lending is more than the interest rate given on deposits. The case with Charminar Bank is reverse. For every Rs 100 invested in government securities it is earning an interest of Rs 4.50 but for every Rs 100 it has borrowed from depositors it is paying Rs 7.50 as interest. The RBI has to set right this anomaly to make the bank come out of the red," says Charminar Bank NRI Depositors' Association convener MA Taher.
The bank authorities need to collect around Rs 450 crore from defaulters and of this only Rs 120 crore was recovered in the last four years. Even the modified one time settlement scheme could not help the bank as the scheme has been challenged in court.
Meanwhile, Charminar has made arrangements for disbursal of the second instalment to depositors up to Rs 5 lakh deposits. The cheques will be distributed later this month.

Charminar Bank Scam: Rebate to defaulters

2005
Syed Akbar
Hyderabad, Jan 30: The Charminar Bank on Monday announced two special packages for defaulters to enable them to clear their loans but in the process reduced the rate of interest on crystalloid amount causing heavy financial loss.
The bank will charge a simple interest of 11 per cent on loans borrowed by defaulters for the period April 2000-June 2005 and 12 per cent from July 2005 to June 2006. Interestingly, the Charminar Bank had paid 16 per cent interest to depositors up to March 2003 but subsequently reduced it to 7.5 per cent.
Since the interest charged on loans is five per cent lower than the interest paid on deposits during the period April 2000-March 2003, the bank will stand to lose about Rs 50 crore. "The bank should not have implemented 11 per cent simple interest with retrospective effect from April 2000. We depositors stand to lose about Rs 50 crore. This is nothing but benefiting willful defaulters," Charminar Bank NRI Depositors' Association convener MA Taher said.
Charminar Bank managing director Khaleel Khan said defaulters who are willing to clear dues before June 2006 can do so in six monthly instalments. The bank will collect 11 per cent simple interest up to June 2005 and 12 per cent interest from July 2005 to June 2006. They also have the option of repaying the loans in 24 monthly instalments up to December 2007. But 13 per cent simple interest will be collected from them for the period January 2006-December 2007.
Of the 1850 defaulters only 215 had opted for the modified one time settlement scheme. As many as 174 defaulters had paid Rs 2.5 crore towards 10 per cent cystalloid amount. However, the biggest problem for the bank continues to be from 17 big borrowers who together owe Rs 236 crore. They have so far not responded to any concessional scheme or offer made by the bank.

Charminar Bank never received Rs 38 crore it had deposited in the scam-tainted Krushi Cooperative Bank

2002
By Syed Akbar
Hyderabad, Dec 1: Charminar Bank never received Rs 38 crore it had deposited in the scam-tainted Krushi Cooperative Bank. It was only in the books of account that the deposits were withdrawn and encashed.
In a startling revelation, the auditors of Charminar Bank noted that the "transaction raises high suspicion about the genuineness of the receipts of cash and also their disbursement as loans".
The Charminar Bank simply made book adjustments showing that the Krushi Bank had repaid the cash deposit after it came to know that the Krushi Bank might collapse any moment under the impact of large-scale financial irregularities. The Charminar authorities, fearing that their murky financial dealings would be out once the Krushi Bank collapsed, made hurried entries in their records to show that Krushi had returned the deposit in instalments. But in reality Krushi Bank never repaid the money to Charminar. This simply means that the size of the scam in the Krushi Bank is Rs 73 crore and not just Rs 35 crore which the investigating authorities believe.
The murky dealings in the Charminar Bank came to light in the audit report carried out by chartered accountants Prema Gopal and Company. Charminar Bank has deposited with Krushi Bank in the form of fixed deposit Rs 38 crore on July 29, 1998 and reportedly withdrew it in phases between March and August 2001. The Bank collapsed in mid-August 2001.
The State government has ordered an inquiry into the entire transaction between Charminar and Krushi Bank. Hyderabad district cooperative officer has been asked to submit report on the murky dealings. According to Charminar Bank managing director V Prabhakar, "the truth will come out when the DCO gives his report. We will initiate action accordingly".
The audit reports says, "entries were passed in the books of the Charminar Bank as if cash has been received from Krushi Bank by a particular branch on a particular day. these branches transferred the same amount on the same day to Purani Haveli branch. Again the same day the same amount was transferred to different branch/branches by Purani Haveli branch and those amounts were shown as given to different parties the same day as loans. The series of transactions, particularly in some cases with different denominations recorded in the books of different branches for the same amount on the same dates raises high suspicion about the genuineness of the receipts of cash and also their disbursement as loans".
According to the audit report cash was deposited by Krushi Bank in Purani Haveli branch without there being any account with the branch. Even the current account in the James Street branch was opened on March 27 a few days after the payment was said to have been made.
The cooperative department is eagerly awaiting the arrest of Krushi chief K Venkateswara Rao, whose interrogation will bring the truth behind the Charminar-Krushi transactions.