CVC asks CBI to probe Rs 1,100 cr loan fraud

 New Delhi, June 14, 2012: The Central Vigilance Commission has asked the CBI to investigate a large scale fraud committed by a private firm by allegedly misusing Rs 1,100 crore loan taken from different nationalised banks and wrongly claiming its end-use.
     CVC officials said the firm was taking loans from various
banks with the stipulations that it will be used by farmers of
different states for growing and supplying castor seeds.
     They said Indian Bank's Gotri Branch in Ahmedabad has
sanctioned a short term loan of Rs 50 crore on December 31,
2007 to 11 commission agents under tie-up arrangements with
the private limited firm.
     "The loan were sanctioned to the commission agents for
onward lending to farmers for procurement of castor seeds and
its cultivation. However, several irregularities were reported
in the loan accounts such as disposal of hypothecated stocks,
fictitious commission agents, etc", the CVC said.
      A study conducted by the bank brought out that the firm
had played a fraud by availing the loans in the names of
commission agents.
      While examining the case, it was found that the said
firm was given loans by various banks with the stipulation
that end use of fund should be used by farmers for growing and
supplying castor seeds to the firm, the Commission said.
      "However the loan proceeds were not used for the
envisaged purpose of onward financing to farmers and the
proceeds were diverted.
     "The total amount involved in the whole case is Rs 1,110
crore and a consortium partners of nine banks lead by State
Bank of India (SBI) and various other banks as consortium had
lent to the firm", it said.
     According to officials, the Commission is looking into
the role of certain banks officials for their alleged
involvement in the alleged fraud.
     It has also come to the notice of various banks that the
firm has perpetrated a fraud on other banks as well. "The loan
amount has been syphoned off through Village Level Aggregators
(VLAs) appointed by the company", the CVC said.
     The Indian Bank has recovered Rs 48.86 crore out of Rs 50
crore lent under the schemes.
     The account has become Non Performing Asset (NPA) with
outstanding of Rs 10.73 crore plus interest from the date of
NPA i.e. March 31, 2012 in eight of the 11 accounts of agents.
The remaining three accounts have since been closed.
     "The CBI has been advised to register the case and
investigate the matter. In addition, the Commission advised
initiation of major penalty proceedings against the erring
officials of the bank", the CVC added.