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


  • 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 an expose by Moneylife.
  • The revelations came out of a Right To Information (RTI) application.
  • 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’.
  • 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.

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 to an expose by Moneylife, 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.


YearOverstated profit
2012-13₹1,220 crore
2013-14₹5,038 crore
2014-15₹3,252 crore



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

An Indian bank is still making the same mistake of hiding the worst and hoping for the best


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