NDCCB chairman Sunil Kedar arrested in gilts scam
N Chintamani in Nagpur
Sunil Kedar, chairman of the scam-tainted Nagpur District Central Co-operative Bank and a Nationalist Congress Party leader, was arrested on Friday by sleuths of the Maharashtra CID in connection with the Rs 1.534 billion securities scam.
He was later remanded to police custody till May 8.
Kedar was grilled by the Criminal Investigation Department for nearly six hours and finally put under arrest. He was produced before Judicial Magistrate First Class S A Ali who remanded the NDCCB chairman to five days' PCR as against the CID plea for a 7 days' remand.
Investigating officer Vivek Phansalkar, SP, CID (Crime), said that an investigating official had been sent to Mumbai to conduct further probe into the scam and interrogate the officials of the broking firm Home Trade Limited.
The Securities and Exchange Board of India has already barred Home Trade from broking activities till May 10. A request has been made to the Reserve Bank of India to check and stop transactions of Home Trade Limited.
Earlier, on Thursday, the Reserve Bank of India directed the Registrar of Co-operative Societies to supersede the board of the scam-tainted Nagpur District Central Co-operative Bank and appoint an administrator.
Kedar, a former state minister for energy, had allegedly invested Rs 1.59 billion in government securities but failed to produce receipts from the broking firms.
The authorities have slapped charges under Sections 406, 420 and 34 of the Indian Penal Code against broking firms Home Trade of Navi Mumbai, Indramani Merchants Pvt Ltd and Century Dealers Pvt Ltd of Kolkata, Syndicate Management Services Pvt Ltd of Ahmedabad and Giltedge Management Services of Mumbai, which had 'defaulted on their commitments'.
When the scam was unearthed, he lodged a complaint with the police in Nagpur against four broking firms for not giving back the bank receipts of gilts, police sources said.
The case was transferred to Maharashtra CID by the city police for investigation.
On April 29, the police booked offences against Kedar on the basis of complaint by audit officer of Department of Co-operative Bhausaheb Avsar for allegedly forging documents while investing the huge sum in government securities.
This is the first instance of the board of a co-operative bank involved in the government securities scam being superseded.
The Registrar of Co-operative Societies and Nabard have completed investigations into the matter.
Nabard has submitted its report and the RBI's move is based on it. An RBI team is currently in Nagpur, investigating the banker-broker nexus that made a Rs 1.25 billion hole in the Nagpur bank's balance sheet.
The bank invested around Rs 1.50 billion in gilts through some Mumbai-based brokers, circumventing the more secure subsidiary general ledger route and thereby violating norms.
It was a case of fraud, and the RBI took the necessary steps to tackle this, sources said. In its credit policy on April 29, the RBI directed regional rural banks to keep their subsidiary general ledger holdings in government securities to deepen the gilts market by increasing the number of players.
The magnitude of the fraud at the Nagpur bank was huge because it did not receive delivery of any of the securities it had paid for, sources said.
The Maharashtra government has also ordered an inspection of 630 urban co-operative banks' dealings in government securities with brokers or any other entities.
"The RBI has asked ROC to supersede the board and appoint an administrator for NDCCB, but a decision has not been taken with regard to the Wardha District Central Co-operative Bank," RBI sources said in Mumbai.
A senior state government official said the government had already ordered inspection into the dealings of all 630 urban co-operative banks spread over the state, with brokers or any other entities for transactions in government securities.
"We have slapped a show cause notice on Osmanabad Central Co-operative Bank asking it why should ROC not dissolve its board in wake of its Rs 290 million exposure to alleged government securities transactions with Home Trade," he said adding, "Maharashtra State Co-operative Bank and Pune's Janglee Maharaj Co-operative Bank are also likely to face ROC's wrath for dealings in government securities."