Has SBI committed a Fraud like Satyam Computers

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Danendra Jain

manager

614 Points Joined April 2009

https://www.allbankingsolutions.com/SBI-Accounting-Jugglery-or-.htm

https://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/psu-banks-to-take-4000-cr-hit-on-pensions/articleshow/8033625.cms

It has been reported several time in the past , written to Prime Minister, President of India and to all important dignitaries on many occasions that for last one decade and more CEO, CMD and top ranked officers of Public sector banks in collusion with , union leaders, association stalwarts ,officials of RBI , Banking Division and Ministry of Finance have not been making adequate provision or making less provisions towards pension or gratuity payment to employees who retire from banks only to show artificial profit and to conceal the misdeeds of top bankers and politicians and to save the image of policy of banking reformation launched and promoted by Doctor economist Mr. Manmohan Singh in 1991 and then supported by UPA government .

Thousands of crores of rupees are sacrificed every year by each bank in waiver of loan or in compromise settlement with defaulting borrowers. Two years ago 75000 crores worth loans were written off by banks to obey the orders of the government who talk of reformation in banking.Crores of rupees are spent by banks in extending red carpet welcome to top ranked government officials, CMD, RBI executive, RBI governor and other VVIP dignitaries but management of bank do not have will to make adequate provision for employees whose contribution in making of bank is of paramount importance and who are more significant and relevant .

Bank management can spend lavishly in motivating team of Chartered Accountants to put their signature of balance sheet without making mention of bad assets. Bank can spend crores of rupees in advertisement, in organization of functions to celebrate or to bid farewell to top officials of the bank but banks do not have adequate income to pay even pension for serving employees. So many suits have been filed in various courts by aggrieved employees or by their association against injustice in Bipartite settlement against the process of promotion but there is none to take care of it. Bank management can pay crores of rupees to advocates to save the legitimate expenses towards staff welfare. This is the pitiable position of PSU banks and this is the position of corrupt mind of top officials of banks and other regulating departments.

Now RBI has given instruction to banks to provide for pension payment at least for retire employees. This amount of provision is estimated to be Rs.4000 crore by RBI. If provision towards pension payment towards serving employees is done which is supposed to be done I assume the amount will come to at least one lac crore and all banks will come in loss and face capital erosion. As such CMD of banks in general through IBA are demanding amortization of provision towards pension payment for coming five years so that burden of provision may be staggered in coming five years.

It is shocking for all those who do not know the level of corruption prevailing in the banking industry. Foul game being played by top bankers is not less dangerous than the game played by Mr. Raju of Satyam Computers.

It s shocking for those media men and economists who considered public sector banks as the best performer and those who are swayed away by sweet promises and tall claim of achievement made by CMD of various banks master mind of fraudulent activities .

It is shocking for government officials who considered Public sector banks as safe and healthy.

But it is not astonishing for bank employees who voiced their protest on fraudulent attitude of CEO, who filed writs in various High courts against injustice in 9^th Bipartite settlement signed on 27^th of April 2010 in between IBA and union leaders of bank employees,.

Long ago it was reported by many bankers that Union leaders and top ranked officers are not making provision towards pension payment and team of Chartered Accountants are selling their signatures and certifying false and inflated profit and concocted balance sheet.

It is worthwhile to mention here that all companies in the country have to give equal contribution towards Provident Fund as much as they deduct from their employees. Banks also used to contribute equal amount in provident fund for their employees as long as employees in general were member of provident fund. When bank employees opted for pension, banks were supposed to contribute similar amount towards pension fund so that future liability arising out of pension payment could be met without any adverse impact on profitability of banks. But unfortunately many banks stopped making provision towards pension to show inflated and false profit and to remain in good book of RBI officials, Ministry of Finance and also to falsely glorify the policy of liberalization and globalization promoted by Mr. Manmohan Singh.

It is never too late. I expect even now the government will ensure accurate provision towards pension payment.

When banks are unable to meet even legitimate expenses for their serving employees there is no justification in considering the banks as healthy and promoting bank officials as ED or CMD. Union leaders considering themselves as protector of interest of bank employees are also supporting illegal acts of the management. In such postion Managing Director of banks and Union leaders who perpetuated fraudulent and such mischievous activity in banks and RBI officials who allowed this to happen for years together are equally responsible and accountable for current mess in banks and they should be adequately punished.

It is pertinent to mention here that on this point as many as 16 writs are pending in various High courts in India .IBA is still silent spectator of Chirharan of bank employees. None of even VVIPs are least bothered of justice. Reign of injustice will continue as long as corrupt leaders are sitting on top posts.

However it is to be welcome by all bankers and especially retired employees that RBI has ultimately advised banks to make adequate provisions towards pension payment. God knows when top officials will apply their wisdom in protecting the interest of field functionaries on whom depends the real health and real future of the bank.

In brief I can say that inordinate delay in delivery of courts in India is used as tool by corrupt officials to continue their earning through unfair means and to continue their whimsical decisions.

SBI Balance Sheet as on 31.03.2011 -- Is it Merely An Accounting Jugglery or Fraud With Investors ?

Is There a Fraud of Rs 10400.41 cr in Pension Fund Trust alone- How different it is from the famous Satyam computers Scam?

Rajendra Kumar Singhal [ rkumarsinghal @ rediffmail.com ]

06.07.2011

Dr K.C. Chakarbarti,

Dy Governor Reserve Bank of India

Reserve Bank of India
Central Office Building

Shahid Bhagat Singh Marg
Central Office,
Fort , Mumbai 400001

Dear Sir

Re: Accounting Jugglery- Fraud in SBI Balance Sheet as on 31.03.2011 -- Rs 10400.41 cr Fraud in Pension Fund Trust alone- How different it is from the famous Satyam computers Scam?

We refer to you’re your comment appearing in various financial dailies “Accounting Jugglery by Banks Draws RBI Flak”. Your comments have been made due o following reasons:

· State Bank of India has shocked the investors with 99% plunge in the net profit for the fourth quarter of fiscal 2011 as it has boosted various provisions.

· It is reported that during - 4th quarter, SBI made a provision of Rs 3263.9 cr for bad debt as compared to Rs 2186.70 cr in the same period in last year.. The full year provision was Rs 6059 cr against Rs 3327 cr showing rise of 82.10% which resulted in net profit dipped by 98.9%

· 70% Provision Coverage Ratio is being blamed for 99% plunge in the profit.

· It is reported that G. Ramaswami President ICAI has taken note of it and written to SBI for explaining the reason for huge provisioning. He has also said that role of RBI as well as SEBI a market regulator is also under question

· P. Sheshagiri Rao, Charterterd Accountant are not bothered about the comments of ICAI (Institute of Chartered Accountant – the apex organization for establishing accounting standards for compliance in India).

In addition to above we have noted the following fraud in the balance sheet- Note on Account no 8 & 9:

· As per Notes (No8) attached to the balance sheet “ consequent upon wage revision and proposed amendment to pension regulations, the pension liability for the year ended 31.03.2011 as determined by independent actuary amounted to Rs 11707 cr. The existing provision is only Rs 1306.70. The additional pension cost liabilities for previous years amounting to Rs 7927.41 cr has been charged to reserve in accordance with dispensation granted by RBI to banks letter no DBOD/BP/No16165/21.04.018/2010-11. The pension cost for the year amounting to Rs 2473 cr has been charged to the profit and loss account.”

· As per Notes (No9) attached to the balance sheet “ Rs 1965 cr has been charged to profit and loss due to enhancement in the gratuity ceiling, and wage revision

Satyam Computers Type Fraud in pension fund trust in the previous year balance sheet has gone unnoticed

As per note -8- attached to balance sheet which reveals that “The additional pension cost liabilities for previous years amounting to Rs 7927.41 cr has been charged to reserve”. It clearly reveals the following:

· In the previous years the bank actuaries have given false valuation on pension liability as mentioned above.

· How the pension liability can go up from Rs 1306.70 cr to Rs 11707 cr (Rs 1306.70 cr +7927.41 +2473) in one year alone.

· It clearly proves that the profit and loss and balance sheet of the bank was falsified. It was not fair and transparent balance sheet of the bank during past several years.

· The liability on account of pension fund was not deposited in pension fund and it was distributed as divided to investor.

Governor RBI & Dr K.C.Charkarwarti Dy.RBI Governor may kindly note :-

· CBI has already prosecuted Hiranandani builders of Mumbai and Mr Raju of Satyam computers under 120 B (punishment for conspiracy) read with 409 (breach of trust) 420 cheating 467/468 forgery 471 use of forgery 477A falsification of accounts .

· Statutory Auditors are liable under company act/ IPC /CA act for gross negligence of professional duty, failure to report material misstatement. Price Water Coopers (PWC) an international Chartered Account Firm) have also been prosecuted by CBI in Satyam Scandal.

· SEBI can prosecute under SEBI ACT.

· SFIO can investigate under 235 to 247 of companies Act 1956. Please note that Satyam CMD/ Auditor/are s being prosecuted under above acts.

· CBI it self has prosecuted Chairman Hiranandani builders in Mumbai for not depositing PF of employees ( not depositing retirement funds is an unpardonable offence) .

Questions to RBI Governor/ Dy. Governor:

· The RBI is carrying out Annual Financial Inspection (AFIR) of Banks every year. Is the AFIR of RBI is an eye wash?

· RBI has directed each bank in 2006 to formulate a compliance policy to ensure that regulatory/ statutory compliances are complied with by the Banks. Whether during the course of AFIR, RBI monitor that regulatory/ statutory compliances have been followed by the bank?. (Please note that the depositing retirement dues are is statutory compliance).?

· Whether RBI treat such misreporting in the balance sheet as fraud if not than why it is not. Do you follow different yardsticks for different Company. Satyam chairman in Jail and SBI chairman is a free bird??

· Will you report the matter to SFIO for suitable action?

· Whether RBI has sent any special investigation team to RBI to unearth the biggest scam in the pension fund trust of employees?.

· Whether RBI has taken any action or advised to ICAI to initiate action against -14- SCAs of SBI who have certified the falsified balance sheet of past years?.

· How incompetent CAs are finding there name in the panel approved by RBI?.

· Whether RBI has reported to other regulator like SEBI, a watchdog to safeguard the investors interest. How the investors have been taken for ride by misleading balance sheet in previous years?

· Whether RBI has taken the matter with Institute of Actuaries to take action against actuaries who are giving reports which suits to then management? Have you asked the institute to carry our independent investigation of pension liability and punish the wrong doer forgiving false actuarial valuation in the previous years.?.

Whether RBI Governor/ Dy Governor feels that by merely issuing press statement will absolve them from their liability?

The above communication may please be taken note for compliance because this is going to be part of judicial proceeding of various HC/ Supreme Court where pension issues are pending and action of Regulator will be under scrutiny.

Rajendra Kumar.Singhal

CONVENOR

FORUM FOR JUSTICE TO BANK EMPLOYEES AND OFFICERS.

rkumarsinghal @ rediffmail.com

You must read following two links also

https://www.business-standard.com/india/news/rbi-wants-all-psbs-to-have-uniform-pension-provision/442663/

https://www.business-standard.com/india/news/k-p-shashidharan-provisioning-for-credibility/442227/

Replies (5)

CA SURENDRA KUMAR RAKHECHA

Practising CA at Surat

26263 Points Joined November 2009

Nicely shared. Thanks.

And this has happened just because provisins of AS 15 were not followed properly.

Now the students can realize how important Accounting Standards are !

It is also true that at the time of Audit Period only 3-4 days are allotted to the Auditors and acute pressure is created on them by Regional and Zonal Offices of the Banks to sign the Balance Sheet as early as possible.

The matter has been raised many times in the Bank Audit Seminars by the members of ICAI.

This also leads to sign the inaccurate balance sheets.

CA ADITYA SHARMA

CA IN PRACTICE

16719 Points Joined May 2011

VERY NICE INFO. SHARED SIR.

THANKS

Avinash V Bhavsar

Sr Commercial Officer

29 Points Joined July 2011

Dear Sir,

Nice Information, Share Sir,

Thanks & Regards

Danendra Jain

manager

614 Points Joined April 2009

Editorial published in The Economic Times on 19th July 2011

32 Years of Nationalization and 20 years of Free Economy

The Reserve Bank of India's (RBI) inspection report on Arcil, the earliest asset reconstruction company set up to buy distressed loans of banks and other financial institutions, is a wake-up call for the banking sector regulator. It points to a number of deficiencies in the asset-reconstruction business and in Arcil's functioning in particular. First, there is the issue of poor corporate governance that enabled major shareholders to collude in offloading their bad loans to Arcil.

State Bank of India , IDBI Bank and ICICI Bank together own more than 50% of Arcil's equity and they apparently used this clout to enter into questionable deals that furthered their own interests at the cost of Arcil. Second, is the technical issue of Arcil's business model for acquiring and subsequently realising non-performing loans (NPLs).

Typically, NPLs are acquired by Arcil under a trust structure and security receipts representing interest in underlying assets issued to Qualified Institutional Buyers, with Arcil acting as the trustee. The proceeds from these receipts are then utilised to pay sellers of NPLs.

Since the sellers are also banks or financial institutions the model is akin to a cosy deal between banks and the asset reconstruction company, reminiscent of the incestuous relationship between financial players that was a hallmark of the 2008 financial crisis. In effect, banks get NPLs off their books by selling to a trust while the latter in turn is funded by the banks.

So instead of impaired loans they now hold security receipts representing the same impaired assets. The third, critical deficiency that the RBI report suggests, if not in so many words, that Arcil seems no better equipped to recover the NPLs than the banks themselves.

The Securitisation Act 2002, was expected to strengthen the hands of banks, financial institutions and other specialised agencies like Arcil by providing a legal framework for securitisation and for enforcement of security. But a quick resolution is still nowhere on the cards. That is what we need to address, both to ensure wilful defaulters don't hold the system to ransom and to turn around locked-in capital in a capital scarce economy.

https://economictimes.indiatimes.com/news/news-by-industry/banking/finance/arcil-under-stress-from-large-lenders-like-sbi-icici-bank-pnb-and-idbi-bank-says-reserve-bank-of-india/articleshow/9263688.cms

Danendra Jain

manager

614 Points Joined April 2009

https://dkjain49709171007.blogspot.com/2011/08/rising-npa-in-public-sector-banks.html

https://m.economictimes.com/PDAET/articleshow/9713575.cms

Asset quality in public sector banks have been going from bad to worse for last several years, and it is not a new phenomenon. Unfortunately or fortunately management of all banks have been manipulating the figures year after year in close nexus with team of auditors and officials of Reserve Bank of India and that of Banking Division in Ministry of Finance to conceal bad assets. They have put pressure on field official in branches and taught not to improve the quality and take strong initiative to recover the money from bad borrowers but taught only various tactics to conceal bad assets to reduce provisioning towards bad assets as per RBI guidelines.

At corporate level top officials of banks including CMD and ED have used various false and fake pleas such as global recession, interest rate hikes, bad monsoons, natural calamities etc to give various reliefs to bad borrowers instead of tightening the screws to trap bad officials and bad borrowers. Top management of bank management have never diagnosed the real causes of bad assets whenever it is found to increase due to some reason or the other. Clever bank management do not want to take action against erring official, corrupt sanctioning official because they themselves are part of dirty game of bad lending. This is why bank management have wrongly but willfully and invariably pleaded that if action is taking against credit officers and top executives , credit growth will immensely suffer and they will not be in a position to achieve the target set by Finance Minister.

After complete introduction of Core Banking Solution (CBS) in banks, Reserve bank of India advised banks to calculate bad assets called as Non Performing assets (NPA) on common terminology using advanced technology and not manually . Banks are slowing getting pressure to assess their quality of assets through automated system taking advantage of CBS technology. Since management of banks find now difficult to conceal bad assets under CBS oriented NPA assessment system, total of bad assets is now being exposed in Balance sheet and it has reached a level of 3% of total advances.

It is to be noted here that NPA percentage is still more than what it has been revealed during last few quarters. Still banks have not declared their entire NPA and after taking RBI hidden consent. Of course they are gradually exposing their bad assets and this is why quantum of bad assets has not jumped to highest position in one time but it is rising quarter after quarter. Officials of RBI, top management of each PSB and official of Ministry of Finance all know very well that actual quantum of bad assets in government banks is far more than 5% of total advances. In more than 25% of three year old branches gross NPA is more than 25% of total advances. There are many such branches where gross NPA is even more than 50% of total advances.

Clever bank management are trying their best to show minimum percentage of gross NPA by either manipulating the system secretly or by resorting to fresh lending by opening new branches and resorting to fresh bulk lending to big corporate, to real estate sector and to mutual funds so that total advances in banks increases which in turn reduces percentage of Gross NPA compared to Total Advances. But this story will not help for longer period until there is adequate improvement in quality and moral integrity of credit sanctioning authority , honesty in promotion processes in banks ,improvement in legal machineries which may help in recovery from willful defaulters , tightening of screws on Chartered Accountants , Valuers and official of rating agencies and change in attitude of politicians. Bank management has to increase number of staff in branches, reduce staff at administrative offices and award honest officers by stopping and punishing corrupt officers who were rising in their career through unfair ways and means. Till now bank management has not tried to cure the real disease and at the same time government of India have also not improved the quality of legal system and not tried to inculcate good culture in politicians who are using bank loan to enhance their personal wealth and to increase their vote banks.

It is very sad that all the time when proportion of bad assets increases in banks , management of banks accuse global recession, interest rate hike, bad monsoon, natural calamities etc but not punish the real culprit. It is remarkable here that when most of top official have occupied the top post and come through bad routes and when they have themselves created and accumulated bad assets in their banks they are not in a position to punish the real culprit and hence they are searching always some weak scapegoat , some lame excuses and pleading some irrelevant reasons before MOF for deteriorating quality of bad assets in banks.

Million dollar questions is “Who will bell the cat when even officials in RBI and MOF are equally weak and guilty”. System is not corrupt but corruption has become the system in banks. Not only banks but all other government departments including judiciary are also victim of same disease. It is therefore not surprising that public demand led by Anna for strong Lokpal Bill is gaining momentum month after month, day after day and none can stop this.Government can torture Anna, Ramdeo and their followers but cannot stop public revolt without punishing corrupt officials and corrupt politicians.