MUMBAI, July 31: A section of the shareholders of Development Credit Bank (DCB) has alleged that 16,000 bogus and fictitious accounts were detected at the Byculla branch of the Mumbai-based bank.

In a letter to the Reserve Bank of India (RBI), the Registrar of Companies (RoC) and the SEBI, they said these benami accounts were used to siphon off fund from the Maharashtra State Financial Corporation (MSFC) as part of the multi-crore cobblers scam. ``The number of accounts pertaining to Byculla branch is highly inflated. In October last year, the the Economic Offences Wing had come to the Byculla branch and taken possession of the account opening forms pertaining to about 3,500 small saving accounts,'' the bank said in a written reply.

In February 1997, the Income Tax Department conducted raids in 22 of the total 34 DCB branches and froze over 10,000 accounts on suspicion that accounts in the name of non-existing individuals were used to siphon off funds from MSFC. The total amount involved in these accounts were estimated to be Rs 20 crore. However, the bank's spokesman, while accepting 3,500 benami accounts in the Byculla branch said, added that ``though no formal communication from the police has been given in this regard, it transpires that certain parties now accused in the alleged cobbler scam had opened these accounts at the branch during the years 1991-96 and gave their own introduction; hence these accounts were properly introduced. DCB has not sanctioned or disbursed any loans to any fictitious cobblers or any fictitious cooperative societies. The bank has not so far heard anything further from the police authorities.''

J Muljiani, General Manager, DCB, agreed that the bank has not taken any strong punitive action against the bank staff for these irregularities, except transferring one branch manager to another branch with a different post. ``The bank has acted strictly in terms of RBI guidelines. The bank has been inspected recently by the RBI and statutory auditors and nothing irregular has been pointed out by them. The bank has a capital adequacy ratio of 23.74 per cent and owned funds of Rs 189.48 crore,'' the bank statement said.

The RBI strengthened account opening procedures to prevent the operation of benami accounts which had been used to siphon off bank funds. While DCB is not the only bank which allowed opening of benami accounts, the RBI has not taken any punitive measures against such erring banks. ``Even the latest RBI inspection has not pointed out any irregularities in the functioning of our bank,'' Muljiani said. It is also alleged that the bank has also started waiving huge secured loans which have the backing of securities and suerty of guarantors to reduce the NPA level. ``In no write off cases, recovery efforts are given up. The accounts are written off against specific reserves, shadow accounts are maintained of these written off accounts and all recovery procedures are followed,'' claimed the bank.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.