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<ul><li> <keyword id="191977" type="General" weightage="20" keywordseo="pratip-chaudhuri" source="Orion">Pratip Chaudhuri</keyword> was arrested by Rajasthan Police on Sunday (October 31) from his residence in Delhi.</li><li>The arrest was made in connection with an alleged sale of a non-performing asset, Hotel Gaudavan, to <keyword id="994351" type="General" weightage="20" keywordseo="alchemist-arc" source="Orion">Alchemist ARC</keyword> at a low value.</li><li>SBI, as well as his predecessor Rajnish Kumar, who took over as SBI chairperson in 2017, have come out in support of Chaudhuri calling his arrest wrong.</li></ul>The arrest of former State Bank of India (SBI) chairperson Pratip Chaudhuri will make banks risk-averse, World Bank’s former executive director CM Vasudev told Business Insider. Vasudev is a retired Indian Administrative Service (IAS) officer, who has served as the finance secretary of the Indian government and as non- of <a href="https://economictimes.indiatimes.com/c-m-vasudev-re-appointed-as-hdfc-bank-non-executive-chairman/articleshow/21151133.cms" data-type="tilCustomLink">executive chairperson</a> HDFC bank. “Public sector banks as it is are very risk-averse and this type of decision will make them even more risk-averse,” Vasudev said, adding that this will deter bankers to not make such crucial decisions and play safe. He explained that banks are the real intermediaries who write finances to the “real sector” of the economy and if the banks become risk-averse, then there is no financing for new ventures. “If such decisions are made criminally liable for individual decision makers, it is going to have a very adverse impact on the economy,” he added. Chaudhuri was arrested by Rajasthan Police on Sunday (October 31) from his residence in Delhi in connection with an alleged sale of a non-performing asset (NPA) — Hotel Gaudavan — to Alchemist ARC at a low value in 2014. The arrest was made on the basis of a protest petition filed by former directors of Hotel Gaudavan and he has been sent to judicial custody for 14 days. State Bank of India (SBI), as well as Chaudhuri’s predecessor Rajnish Kumar, who took over as SBI chairperson in 2017, have come out in support of Chaudhuri calling his arrest wrong. “This seems to be a case of highly motivated, high-handed action. This seems to be an error of judgment. There is a due process and set of rules laid out by the RBI for the sale of assets to ARCs [asset reconstruction companies]. Where is the corruption here?” Kumar <a href="https://www.moneycontrol.com/news/business/pratip-chaudhuri-arrest-former-sbi-chairman-rajnish-kumar-calls-the-move-a-motivated-high-handed-action-7662941.html">said</a> in an interaction with Moneycontrol. SBI has shared a detailed statement, highlighting the facts of the matter. Interestingly, SBI wasn’t even made party to this case even though the alleged “scam” happened while Chaudhuri was serving as the chairperson of this bank. “SBI would like to reiterate that all due processes were followed while making the said sale to ARC. The bank has already offered its cooperation to the law enforcement and judicial authorities and will provide further information, if any, that may be called for from their side," the bank said, adding that the sale to Alchemist ARC was done through a laid-down process. <div type="image" title="The arrest of former SBI chief Pratip Chaudhuri may prevent bankers from making any risky decisions, say experts" msid="87482644" hostid="261"></div> Abizer Diwanji, partner and national lead of financial services at EY, told Business Insider that the arrest of Chaudhuri was wrong, but the banking community needs to be “cautious that when they sell any asset they should not only aim to recover their loan amount, but get a fair value out of it.” The loan to Gaudavan Group was ₹24 crore, but the value of the properties were ₹200 crore. SBI, however, sold the assets to Alchemist ARC for ₹ 24 crore to recover their loans. <div type="image" title="The arrest of former SBI chief Pratip Chaudhuri may prevent banks from making any risky decisions, say experts" msid="87482320" hostid="261"></div> SEE ALSO <a href="https://www.businessinsider.in/business/startups/news/logistics-startup-delhivery-files-for-a-nearly-1-billion-ipo/articleshow/87481889.cms" data-type="tilCustomLink">Logistics startup Delhivery files for a nearly $1 billion IPO</a> <a href="https://www.businessinsider.in/business/telecom/news/elon-musk-owned-starlink-forms-subsidiary-in-india-will-soon-apply-for-licenses/articleshow/87480590.cms">Elon Musk-owned Starlink forms subsidiary in India, will soon apply for licenses</a> <a href="https://www.businessinsider.in/stock-market/news/shares-of-tata-motors-gains-on-strong-demand-for-jlr-despite-14-fold-widening-of-loss/articleshow/87480018.cms">What Tata Motors investors are excited about — obviously not the huge loss</a>

The arrest of former SBI chief Pratip Chaudhuri may prevent bankers from making any risky decisions, say experts

<ul><li>The State Bank of India overstated its profits by as much as ₹9,500 crore for three years in between 2012-13 to 2014-15, according<a href="https://www.moneylife.in/article/exclusive-rbi-inspection-reports-on-sbi-reveal-evergreening-window-dressing-cover-ups-and-worse/57631.html"> </a>an expose by Moneylife.</li><li>The revelations came out of a Right To Information (RTI) application.</li><li>The country’s largest bank has suppressed employee fraud, covered bad loans, flouted anti-money laundering rules, covered up bad loans by a mechanism referred to as ‘window dressing’.</li><li>In many cases, the bank has not enforced securities provided on a loan, and loans were disbursed even before a charge was created on the collateral.</li></ul> A fourth of the country’s bank deposits are making their way to State Bank of India (SBI). But, how safe is it there? According<a href="https://www.moneylife.in/article/exclusive-rbi-inspection-reports-on-sbi-reveal-evergreening-window-dressing-cover-ups-and-worse/57631.html"> to an expose by Moneylife</a>, the bank has overstated its profits by as much as ₹9,500 crore for three years in between 2012-13 to 2014-15. What makes it worse is that all this information is available with the banking regulator, Reserve Bank of India (RBI), and the dated details came out after a petition was filed under the Right to Information (RTI) Act, by an activist Girish Mittal. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">Year </td><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">Overstated profit </td></tr><tr><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">2012-13 </td><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">₹1,220 crore </td></tr><tr><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">2013-14 </td><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">₹5,038 crore </td></tr><tr><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">2014-15 </td><td style="border-left:solid #000000 0.9960975000000001pt;border-right:solid #000000 0.9960975000000001pt;border-bottom:solid #000000 0.9960975000000001pt;border-top:solid #000000 0.9960975000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;">₹3,252 crore </td></tr></tbody></table> Source: Money Life There were two chairpersons running the bank during the period-- Pratip Chaudhuri was the chairman from 2011 to 2013 as Arundhati Bhattacharya too charge to stay on till 2017. SBI’s box of troubles The annual inspection of banks’ accounts by RBI has opened a Pandora’s Box where many evils came out—where the country’s largest bank has suppressed employee fraud, covered bad loans, flouted anti-money laundering rules, covered up bad loans by a mechanism referred to as ‘window dressing’, according to the report. An e-mail sent to SBI seeking answers on the revelations, did not elicit any response. Most Indian banks were found guilty of trying to hide the rising problem of bad loans. They would either give fresh loans to pay old ones or book the losses in a different year to soften the blow on the company’s financials. In SBI’s case, the RTI response reportedly revealed that these factors were seen in the loans given out to diamond trading and power sector. Loans to diamond traders have brought down banks, especially Punjab National Bank scam where diamantaire Nirav Modi made away with unpaid loans of ₹2 billion and is now in the UK. Yet, SBI is not in as much trouble, not from RBI who is aware of the situation, not from its 435 million customers --- that’s over 30% of India’s population! Like Goldman Sachs, it is everywhere and, probably, too big to fail. Flouting Norms The report says that the bank also flouted norms laid down by the Reserve Bank of India (RBI) itself with regards to Know Your Customer (KYC), lending limits set on sectors and individuals. The bank, as per the report, was also lax with its loans. In many cases, the bank has not enforced securities provided on a loan, wherein assets of defaulters are taken over. In some cases loans were disbursed even before a charge was created on the collateral. And, the suppression of data has happened at every level since most of the credit problems were never taken to the board as well. Scrubbing it clean In all, the bank performed a clean-up exercise every time a new chairman took over. The first year a new chairman comes in, huge amounts are written off the books, and has become a common practice with the bank. This leaves the chairman of the bank concentrating on ‘managing profits’. The owner of the bank however is the government. And it seems to be doing its part too. As non-performing assets as a result of bad loans increased and credit growth slowed down, the government is looking to recharge public sector banks (PSBs) with fresh funds. In the latest Budget 2019, the Finance Minister Nirmala Sitharaman said that they would be giving out as much as ₹75,000 crore to re-capitalise government banks, so that they can kickoff growth in the country, with renewed interest. The mistakes of the past have been conveniently forgotten. SEE ALSO 
 <div type="NEWSINCONTEXT" target="false" refhostid="261" refmsid="69557477" refmstype="2" refmssubtype="0"><cdata><![CDATA[An Indian bank is still making the same mistake of hiding the worst and hoping for the best]]></cdata></div>


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India’s largest bank was caught lying about its profits for 3 years but no one got punished, according to an expose

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The arrest of former SBI chief Pratip Chaudhuri may prevent bankers from making any risky decisions, say experts

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India’s largest bank was caught lying about its profits for 3 years but no one got punished, according to an expose

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