RBI’s demonstrated failure to act on Complaint regarding Fraud NPAs in COSMOS CO-OPERATIVE BANK LIMITED

Ref: KVS/Frauds in Cosmos Bank/201819/005

 

December 31, 2018

 

Mr. N S Vishwanathan

Dy. Governor
Reserve Bank of India
Central Office Building
19^th Floor
Shahid Bhagatsingh Road
Mumbai – 400001                                   
E-mail: dgnsv@rbi.org.in

Sir,

Sub:  RBI’s demonstrated failure to act on Complaint regarding Fraud NPAs – Cooperative Banks – New Age Bank Robbery/ Thuggery in Cosmos Co-operative Bank Limited, Cosmos Towers, ICS Colony, Ganesh Khind Road, Pune – a multi-state cooperative bank.

 

Ref:  1. My complaint letters dated 21/08/2018, 07/09/2018 and 09/10/2018 sent by email.

          2. Letter dated 25/08/2018 from Central Registrar of Co-operative Societies, New Delhi addressed to you to investigate the complaint as the nature of complaint falls within your domain.

          3. Letter dated 28/11/2018 from EOW, Mumbai Police.

          4. My letter dated 30/11/2018

          5. Letter dated 07/12/2018 from Ministry of Finance directing RBI to investigate this frauds.

          6. My follow-up letter dated 17/12/2018

 

All the above letters dealing with the captioned subject are on record of the Reserve Bank of India.

I have been following up my detailed complaint against the Board of Directors of Cosmos Co-operative Bank Limited with RBI since 21/08/2018. The entire issue has been stonewalled, or so it seems from the complete inaction by RBI in this regard. The demonstrated discomfort and revealed reluctance of RBI to initiate action in these fraud NPA cases and your blessings to Mr. Mukund Abhyankar and his colleagues on the Board of Cosmos Co-operative Bank as boasted by Abhyankar himself has forced me to pin this letter to you for doing necessary.

Let me first draw your attention to the instructions given by the Finance Ministry about how to deal with NPA accounts of more than Rs.50 crore.

Finance Ministry on Tuesday, the 27^th February, 2018 had directed PSU Banks to probe all NPA accounts of over Rs. 50 crore for possible fraud and accordingly report the cases to CBI. The direction comes amid state-owned lender PNB reporting Rs. 12,700 crore fraud through alleged fraudulent misuse of letters of undertaking (LoUs) by billionaire jeweler Nirav Modi and associates. Besides, other PSBs too have approached investigating agencies as borrowers (as in the case of Rotomac Group and Simbhaoli Sugars) have not returned loans.

Financial Services Secretary Rajiv Kumar, through a tweet informed that managing directors of PSBs have been directed to detect bank frauds and refer cases to the CBI - “PSB MDs directed to detect bank frauds & consequential willful default in time & refer cases to CBI. To examine all NPA accounts more than Rs. 50Cr for possible fraud.”

Sponsored by ZINCPSBs have also been asked to involve Enforcement Directorate (ED)/ Directorate of Revenue Intelligence (DRI) for violations of PMLA, FEMA or Export Import norms.

Rajiv Kumar further said the Chief Vigilance Officer of the Bank concerned will have to vet complaint and coordinate with CBI for frauds exceeding Rs. 50 crore. Also, banks will have to seek borrower status report from Central Economic Intelligence Bureau (CEIB) on the account turning NPA and CEIB will have to revert in a week. Banks have to involve ED/DRI “if conditions warrant,” under the framework for timely detection, reporting, and investigation of large value bank frauds.

Although, the Finance Ministry had referred to PSBs, there is no reason to believe that Finance Ministry has exempted Co-operative banks of Private Banks from this reporting.

I am once again giving you the list of fraud NPAs known to me and admitted by Mr. Milind Kale – Chairman, Mr. Krishnakumar Goyal - Director and Mr. Mukund Abhyankar – Group Chairman during some of the various meetings.

The limit of Rs.50 crore for possible criminality is fixed considering the volume of loans and advances of the PSBs. The same yardstick cannot be applied to a co-operative bank like Cosmos Bank. Considering the magnitude of operations, the limit for co-operative Banks for compulsory reference to CBI/EOW for investigation into the criminality is Rs.1 crore. Since the Board of Cosmos Bank has failed to refer these accounts to investigation agencies like CBI/EOW and if required to ED/DRI for obvious reasons, it is incumbent upon RBI to step in and take corrective measures immediately.

The large accounts that deserve reference to investigation agencies are listed below:

Table – 1

  Rs. In Crore

Sr. No.	Particulars of Defaulter/Scamster	Amount in Rs.
1	Brainer Impex Private Limited together with MBPY Exim Private Limited (became NPA in four months)	130.15
2	Euro Multivision Limited: (became NPA within a year)	278.59
3	Euro Décor Private Limited: (became NPA within a year)	82.63
4	Euro Ceramics Private Limited: (became NPA within a year or so)	59.68
5	Euro Merchandise (India) Limited: (became NPA within a year or so)	32.20
6	Other entities in Euro Group: as confirmed by Directors Krishnakumar Goyal, Mukund Abhyankar and Milind Kale (same fate as other Euro companies mentioned above)	445.00
7	Kalanikethan Textiles And Jewels Private Limited: (within 6 to 9 months – Rs.45 crore NPA of HDFC Bank was bought by Cosmos Bank).	89.30
8	Rosary Education Trust, Pune: within 1.5 years	46.50
9	Noble Exchange Environment Solutions Pune LLP: (within 2 years)	31.21
10	Pratibha Logistics Private Limited:	52.00
11	Pratibha Shipping Limited:	157.51
12	Graf Laboratories Private Limited: (within two years or so)	114.75
13	Krishna Structural Steel (India) Limited: (within a very short time)	85.00
14	Roji – Tasha Stampings Private Limited: (within a short time)	20.00
15	TKT Hightek Cast Private Limited, Ahmadabad: (within 2 years)	113.94
16	S K Wheels Private Limited: (within a short time)	109.47
17	Hollywood Academy: (within a short time)	41.39
18	Dilip Chhabria Design Pvt Ltd:(within a short time)	47.00
19	Parshuram Forge Private Limited: (within a short time)	50.15
20	Country Club Hospitality & Holdings P. Ltd: (within a short time)	60.00
21	Tricot Impex Private Limited: (taken over from SBI in October 2015)	30.00
22	Sachin Travels Limited: (within a short time)	23.95
23	Desai Tusharkumar Nanubhai:	27.26
24	Shri Kankeshwari Agro Pvt Ltd: (Rs.30.00 crore taken over from Bank of Baroda in October 2015)	32.85
25	Snehadeep Structure Pvt Ltd.: (within a short time)	25.31
26	Shubhada Tools Industries Private Limited: (within a short time)	22.70
27	Nectar Prints Private Limited: (within a short time)	20.40
28	Citrus Resorts Bangaluru Private Limited: (within a short time)	19.93
29	Little Master Auto Cast Pvt Ltd.: (within a short time)	21.75
30	Janata International: (within a short time)	18.48
31	Anoushka Medicare & Diagnostics Pvt Ltd: (within a short time)	18.19
32	Pandit Automotive Sangli Limited: (this loan was transferred from SBI in October 2015) – (within one and half  years)	16.94
33	Pandit Automotive Satara Limited: (this loan was also transferred from SBI in October 2015) – (within one and half years)	16.00
34	Manan Autolink Private Limited: (within a short time)	58.20
35	Saptasatij Metatech Private Limited: Rs.102.62 crore (within a short time)	102.62
36	Tristar Cars Private Limited: (This company has satisfied all loans of Tata Capital Finance amounting to Rs.1.58 crore in Match 2016. The Cosmos bank has written off Rs.50.35 crore meekly during FY 2016-17 and 2017-18. The loan was sanctioned in March 2013)	50.35
37	Shakti Bio Science Limited: (Rs.50.26 crore taken over from Union Bank of India in March 2013 to eventually write off in Cosmos Bank’s books)	42.58
38	Rotoflow Polymers Private Limited: (Rs.17.96 crore written off in FY 2017-18, the balance in earlier years. Loan sanctioned in December 2013 onwards.)	49.90
39	K A Malle Pharmaceuticals Limited:	15.23
40	Duke Corporation Limited: (The loan was mainly utilized to satisfy loan of Rs.15.00 crore from Export Import Bank of India and Rs.20.00 crore from Citi Bank in July – November 2010 and the rest is the history)	50.00
41	Masscorp Limited: (within a short time)	25.00
42	Dhanshree Infratech Private Limited	6.80
43	Shubh Tex Production Pvt Ltd: (within a short time)	7.90
44	Bogus vehicle loans at various Branches: (instant loss)	25.00
45	Surface Graphics Private Limited:	8.21
46	Shirish Polychem Limited	14.00
47	Crystal Clear Veg Oil Refinery Pvt Ltd.: within 4 months)	23.63
48	Mirco Dynamics Pvt Ltd.:	10.00
49	Little Woods Nursery: (in 8 months)	00.70
50	Woodstock Helicopters Pvt Ltd:	12.31
51	Goenka Omprakash Basantla:	4.80
52	Glaacia Cosmetics Pvt Ltd: (within a year)	2.73
53	Lokhandwala Mohammad Abdul	14.00
54	Arya Distributors	2.61
55	Lokseva Pratisthan	0.76
56	Ranjana Newspirnt Imports	1.22
57	Balaji Dhanya Bhandar (Pro. Deeparan Chowdhary)	2.81
58	Control Automation Pvt Ltd.	2.11
59	Sumo Industries P. Ltd.	5.12
60	Balaji Cars Pvt Ltd.	13.45
61	Patel Anil Kanjibhai	14.50
62	New Phalton Sugar Works Limited	10.12
	Total	2,916.89

 

 

The above list is only illustrative and not exhaustive. There are many more NPA skeletons hidden in the cupboards of the Board of Directors of the Bank and they are slowly tumbling out. The recovery, if any, in all above cases cannot exceed 2% as per the private admission given by Mr. Krishnakumar Goyal in the presence of Mr. Mukund Abhyankar and Mr. Milind Kale in view of either no collateral security is on record or the collateral security offered is criminally overvalued. The published annual reports also underline this position. All these cases represent instant NPAs and/or Quick NPAs and therefore need to be investigated for fraud.

 

When I was taking up these accounts earlier with the Board of Cosmos Bank since May 2016 and confronting them with my detailed analysis of the fraud, I did not get any response. During my interaction with Mr. Vikrant Ponkshe, then MD (who resigned on 31/12/2016), I had asked him one question how could this be ignored by the Statutory Auditors and the RBI inspection staff when these frauds were happening in 2012-2015 period so openly?

He told me statutory auditors only give report in the prescribed format, collect the fees and go away. There were some pressure from the RBI inspection staff. However, they are taken care of  by Mr. Mukund Abhyankar who has many friends in RBI and one among them is very powerful who prevails upon any query raised by inspection staff about the objectionable business of the Bank. After much prodding, your name came up as the main support base of Mukund Abhyankar and his associates manning the Board of Cosmos Bank. You were then Executive Director of RBI and co-operative sector was in your portfolio. The above figure of Rs.2,916.89 crore constitutes about 27.1% of NPA ratio in Cosmos Bank. Just because NPA has gone above 15%, RBI had put many nationalized Bank under PCA. Just for Rs.400 crore odd NPAs, RBI appointed Administrators on Rupee Co-operative Bank in 2013 but NPAs worth Rs.4,000 odd crore in Cosmos Bank have failed to invoke any response from RBI! Why have you left out Cosmos Bank from similar action?

At the cost of making little diversion, I may state here that in 2009-2010, when I had first complained to RBI, UBD, Worli, Mumbai against Cosmos Bank for the wholesale violation of RBI master circular prohibiting the co-operative banks from giving loans, advances and any other credit facility to the Directors, their relatives and entities where they have substantial interest, it was your name that had been thrown at me by Mukund Abhyankar who was the Chairman of the Cosmos Bank at that time for stalling the investigation. My enquiries with CGM, UBD, Garment House, Worli at that time also hinted at pressure being out by you to ignore the complaint and the CGM office had the audacity to tell me not to pursue that complaint. It was only when I directly approached Dr. Subba Rao, the then RBI Governor that the investigation was completed and Cosmos Bank was fined Rs.5 lac in November 2010.

Now let me come back to the present issue of fraud NPAs.

After the resignation of Managing Director Vikrant Ponkshe on 31/12/2016, I had many joint meetings with Mr. Mukund Abhyankar – Group Chairman, Mr. Milind Kale – Chairman and Mr. Krishnakumar Goyal – Director on the fraud NPAs as listed in the table above through the years 2017 and 2018. I had asked them pointed questions. However, Mukund Abhyankar nonchalantly dismissed my questions and openly challenged me to file complaint against them with RBI. The full confidence that RBI would not initiate any action was perhaps emanating from your elevation as the Dy. Governor of RBI looking after, inter alia, Department of Co-operative Banking Regulation, Deposit Insurance and Credit Guarantee Corporation (DICGC), Financial Stability Unit (FSU), Inspection Department, Risk Monitoring Department (RMD). In fact, after your elevation as Dy. Governor in June 2016, Abhyankar & Co. had become very bold and never bothered about RBI and its inspection staff. During my conversation with Mr. Abhyankar, he repeatedly invoked your name and explained how close he has been to you in co-operative banking sector working on various platforms including one high power committee on co-operative banking, etc. etc. in the presence of other two Directors of the Cosmos Bank. Abhyankar also boasted before me how you hoisted him on the troubled Rupee Co-operative Bank Limited, Pune as one of the Administrators! It is a different matter that mass protests against Abhyankar resulted into his exit in less than 2 months.

Besides invoking your name, Mukund Abhyankar, Milind Kale and Krishnakumar Goyal as well as ex-MD Vikrant Ponkshe had also invoked names of politicians and had tried to impress me by telling how some of the defaulters/fraudsters are related/associated to them and my efforts to cleanse the corruption in Cosmos Bank would eventually be an exercise in futility. Many staff members have narrated to me the ‘dirty’ tactics deployed by the Cosmos Board to ‘convince’ the RBI inspection staff to ignore the fraud NPAs that cannot be printed here.

It would not be an exaggeration if I were to say that the shamelessness of the corrupt is at its vulgar peak on the 12^th floor in Cosmos Tower.

Abhyankar had also boasted how he managed to get RBI permission for disbursement of 2.8% dividend despite heavy loss, huge NPAs and recent cyber-attack through your indulgence. The staff also speak about Abhyankar’s closeness with you quite openly and blame you in private for the current mess in the Bank. Recently, Abhyankar has been telling the staff that he has managed to get permission from RBI that the loss of Rs.95 crore suffered by the Bank in cyber-attack can be written off by spreading over 2 or 3 years and not in one year all thanks to you. This is becoming very alarming. Under which law or prudent financial norms such deferment of loss that has already crystalized is justified? This is all window dressing wantonly applied apparently under your blessings just to delay the inevitable in Cosmos Bank.

The buck for the total callousness shown so far by RBI w.r.t. fraud NPAs in Cosmos Bank in my opinion stops at your doors Mr. N S Vishwanathan and nowhere else. The confidence of Mr. Mukund Abhyankar, the Group Chairman of the Bank that nothing would happen from RBI sufficiently justifies such inference. The rot seems to be so deep rooted in RBI that even after Finance Ministry issuing directions on 07/12/2018 to investigate the complaint regarding fraud NPAs, RBI has done absolutely nothing. The ‘autonomous’ status of RBI cannot be construed to this extent that it is not even answerable to Government of India and Citizens of India.

I have already given detailed analysis of many of the above accounts to RBI vide my letter dated 21/08/2018. Economic terrorism is more dangerous than Islamic terrorism. And even you would agree that the fraud NPAs constitute ‘economic terrorism’. It is incumbent upon you to go after these economic terrorists or white collar terrorists whose capability to inflict damage to the nation is more than the terrorists from across the border.

I once again request you to take this matter seriously and initiate investigation by suspending this corrupt Board of Directors and appointing Board of Administrators. If you are not in a position to initiate any corrective and punitive action against the corrupt Board and their employees as well as fraud borrowers, kindly let me know the lawful, logical and palatable reasons for your such inability within seven days from the receipt of this letter so that I can approach the other forum/fora to highlight the deep rooted corruption in the system at various levels and bring this rot to the knowledge of public at large through the media – both social and main stream to wake you up from your pretended slumber.

Hope you would take the matter seriously.

Thanking you.

Yours faithfully

Kishor Satwick

CC:

1.   Mr. Shaktikanta Das, Governor, Reserve Bank of India, 18^th Floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai – 400001 for information and initiating necessary action. E-mail: governor@rbi.org.in

2.   Mr. Arun Jaitley, Hon’ble Finance Minister, North Block, New Delhi – 110001. E-mail: fmo@nic.in, for information and necessary action.