Mumbai, Feb 13: A Rs 18-crore scam has been unearthed in the private-sector IndusInd Bank. The scam, detected at the bank's Ahmedabad branch, is likely to hit its profitability. The amount would have to be provided for in the 1997-98 balance sheet. The net non-performing assets of IndusInd Bank, pegged at 2.07 per cent in March 1997, will also go up.The amount was withdrawn from the branch office at Ahmedabad through an "overdraft against uncleared effects". Under this facility, high net worth clients -- who have had no record of default -- are allowed to draw money against cheques issued by them even before they are cleared. An Ahmedabad-based builder and bullion-trader with a modest exposure in drugs and pharmaceuticals started availing themselves of this facility in September 1997. The builder first started availing himself of it against uncleared cheques, which were lying around for a long period without being cleared. "After the builder availed of the facility, the cheques -- sent to the clearinghouse -- bounced," IndusInd sources said.
The scam was unearthed last week. "We are not sure whether the operation was carried out in connivance with bank employees. We will know only after the investigation is complete," said the sources. "Ideally, cheques of such a big amount should not have been left lying around without sending them for clearing."
Going by internal guidelines, not even a branch manager is allowed to extend an overdraft facility against uncleared cheques to any customer without the head office's prior clearance. The bank, however, allows certain customers to avail of this facility. "The Ahmedabad branch did not take permission from the head office before allowing this facility," said sources.
IndusInd is confident of recovering the money. "The amount is fully secured against landed property and we are confident of recovering the money before the close of the financial year," said sources. Four IndusInd employees, involved in the scam, were likely to be sacked. "We will certainly askthem to leave if anything is proved against them.
The investigation report will be submitted on Saturday," sources said. The irregularity, which has taken the bank by surprise, has forced the management to call for a review of the internal guidelines. "We will immediately work out revised guidelines for the bank, which will be applicable to all branches," sources said. Though private banks have been crowing about the fool-proof systems they have in place, this is the second instance of an irregularity arising in a new private-sector bank. In October 1997, Centurion Bank was hit by a Rs 13-crore LC scam.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
