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SBI & PNB Guilty of Dereliction of Duty in Evaluating Bhushan Steel Ltd - SIFO

Steel News - Published on Mon, 23 Sep 2019

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Economic Times reported that Serious Fraud Investigation Office probe team dealing with financial fraud has told a Delhi court that State Bank of India and Punjab National Bank were guilty of dereliction in the performance of their duties’ while assessing the credit worthiness of Bhushan Steel allowing the debt-laden steelmaker to avail credit that later bled the lenders. SFIO report has been shared with the Reserve Bank of India and Department of Financial Services so that the banking regulator and the DFS can enquire and take appropriate action against the bankers concerned.

The SFIO report showed that the two banks failed to resolve the issue of non cooperation by BSL that Deloitte Haskins & Sells had raised. Red flags in the forensic audit of long-term capital gains and a report by audit firm Kroll alleged that diversion of funds by ex-promoters of BSL was never discussed in the joint lenders forum or the steering committee, comprising of the six major lenders to BSL.

According to the probe report, DHS completed the forensic audit for 2012-14 and 2014-16 periods, and submitted its pre-final reports to SBI between August and November, 2016. The legal counsel was advised to present its views on the finding of the forensic audit conducted by DHS, concluded “No commission of malfeasance, fraud or siphoning of funds by BSL could be established from the forensic audit report covering the period 2012-14 and 2014-16."

The Steering Committee, based on the report of the legal counsel, decided that PNB being recipient of the letter from RBI, for conducting audit on BSL, would reply to the RBI queries on the forensic audit report. However, the SFIO probe revealed that “DHS in its forensic audit report had never concluded that letters of credit were genuine. Rather it was mentioned that supporting documents of 1932 transactions aggregating to INR 39,062 crore recorded in the BSSL-ORISSA ledger account were not provided. DHS identified 8 LC transactions amounting to INR 194 crore where funds were received from the beneficiaries of the LCs, but no supporting documents or reasons for these transactions were provided by either BSL or the banks.”

The agency’s report states that the letter sent to RBI was allegedly tweaked by officials of SBI and PNB in such a manner that vital facts were suppressed and comments of the management of BSL were conveyed as the observation of Deloitte in the forensic audit reports.

Economic Times

Source :

Posted By : Amom Remju on Mon, 23 Sep 2019
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