“Fraud,
Forgery and Financial Irregularities in Odisha state Cooperative Bank,
Bhubaneswar”
-An Extract
from Statutory Inspection
Report submitted by NABARD-
(Exposed under RTI on 27.4.19 from the PIO, office of
Registrar of Cooperative Societies, Odisha)
1. Introduction
OSCB scam is not
new for the people as well as RTI Activists
of Odisha who are spearheading
campaign for effective implementation of RTI and
to fight out corruption in the state. Earlier, huge
corruption and irregularities in
Odisha State Cooperative Bank ,
Bhubaneswar has been exposed under RTI
several times and put in public domain
for knowledge of the public at large. The expose of corruption and
misappropriation of fund started with
revelation of statutory audit Report of
Odisha State Cooperative Bank
presented by Auditor General,
Cooperative Societies, Odisha on 30.9.2011. Armed with this
Report and information obtained under RTI , many RTI Activists like Sri Ashok Nanda, Sudhir Mohanty,
Biswajit Mohanty have filed series
of complaints starting from to
Chief Minister to State Vigilance. But astonishingly, no inquiry has been
conducted since 5 years. Rather
it has been suppressed and
corrupt officers being
awarded with promotion time and
again to suppress scams. ( For details ,
visit link https://odishasoochana.blogspot.com/2018/08/inquiry-into-oscb-scam-worth-rs500.html.)
Recently, NABARD, Regional
Office, Bhubaneswar has presented its
statutory inspection report of the Odisha State Cooperative Bank Ltd. to State
Government which was conducted from 14th February to 6th
March,19 with reference to its financial position as on 31st March 2018 under
Section 35(6) of the Banking Regulation Act, 1949 ( As Applicable to Cooperative Societies). All the
issues pointed out by NABARD
in their Inspection Report has
justified earlier allegation of RTI Activists and complaints filed
several times in this regard.
The Odisha State Cooperative
Bank (OSCB) was registered on 2nd April 1948 and commenced its
banking business on the same day. The area of operation covered the entire
State of Odisha. The Bank was included in
the second schedule of Reserve Bank of India, 1934 with effect from 2nd
July 1966. The Bank had been granted
license under section 22 of the B.R.Act,
1949 (AACS) ON 23.12.2009.
2.
Major Fraud, Forgery and Irregularities in
OSCB
2.1. Illegal extension of service to Sri T.K. Panda,
Ex- MD ( Major irregularities and Fraud )
Under the staff service Rules, Sri T.K. Panda had attained
the age of superannuation as on
31 October 2013 ( which was 58 years
before revision), but continued
in service after 1 November 2013 till 31 October 2015 ( two years) in
violation of ( then existing ) staff
Rules No. 42 and sections 28(3)(b)(1) and 33 –A of the OSC Act, 1962 under which RCS ( Registrar of Cooperative Societies) had
not accorded approval which
was mandatory. The RCS had raised queries on his appointment which were
never replied by the bank.
However, RCS vide his order No. 14866 dated 21 August 2014
( MC resolution 22 August 2014) had extended
his tenure as Managing Director ( MD) UNDER section
28(3)(b)(1) for a period
of 2 years from 1 November
2015 to 31 October 2017 , without post
facto approval of the prior period, effectively making the said period of
continuance of Sri Panda as MD
untenable. Incidentally, the President
of OSCB vide letters dated 13
June 2017 and 29 June 2017 had appraised RCS and Secretary, Cooperation citing provisions of old guidelines of
RBI on
fit and proper criteria
dated 18 June 2008 instead of
latest applicable guidelines
dated 3 March 2009 and 5
July 2011 and requested for
extension of Sri T.K.Panda as
MD for
further period of 3 years on
the grounds that suitable
officers complying with fit and proper
criteria were unavailable in the
bank whereas the actual
position was contrary to the point.
Past History of forgery of Sri T.K.Panda
Sri
Panda during his tenure as CEO of Keonjhar
Central Cooperative Bank was instrumental in taking over the defaulted
NPA loan of Sarthak Minerals (
owned by one , Bijayalaxmi
Patnaik , w/o- Sura Patnaik , (
incidentally then headed Keonjhar CCB as
President) from Bank of India , vide
sanction order No. 6707 dated 31 March 1998, violating extant credit authorization norms
and without examining credit worthiness of the borrower. It was further found that the present loan outstanding together
with the interest was more than Rs. 3.50 crore which constituted major
default to the bank worsening its
financial position. Moreover , in letter No. 1575/Vig.Cell dated 3 April 2010, Government in General
Administration ( Vigilance ) Department
had forwarded the memorandum of article of
charges , statement of
imputation, memo of evidence along with SP’s report to RCS
and asked him to take
disciplinary action against
the officer concerned for his
involvement in sanction and disbursement of irregular
cash credit loan
of Rs. 10 lakh by showing undue
favour to Shri Debashis
Patnaik and
Debadutta Patnaik, partners in
Bhubaneswar Commercial Corporation without valid
documentation and on the basis of
fabricated records violating financing norms of OSCB. The cases were still
active and yet to come to logical
conclusion. Incidentally as per Keonjhar
CCB, AGCS( Auditor General of
Cooperative Societies) special audit
report and RCS ( letter dated 31 January 2019), Rs. 83,54,973 was audit recoverable against Sri
Panda pertaining to his period as
CEO of Keonjhar DCCB ( District Central Cooperative Bank). The case
is still pending even two decades after
the cause of action. As per circular
of the Government in Cooperation
Department ( No. 4868 dated 30 June 2015) , the action should have been taken by fixing responsibility on the MC ( Management Committee)/MIC ( Management In-Charge)/ CEO ( Chief Executive Officer).
NABARD has
recommended that in view of
magnitude of issues raised and extent of evidence required to be examined , a special investigation by an officer
or a team from the cooperative regulator , such as RCS needs to be taken up. OSCB may make a special
request to RCS for constituting
an enquiry for examining the
allegations along with available facts ,
identify act of omissions and commissions , fix responsibility for lapses and take further necessary
action as may be deemed appropriate.
2.2. Huge Illegal payments made to Bishnupada
Sethy, MIC from OSCB
Sri Bishnupada Sethy, IAS
Commissioner-cum-Secretary, Cooperation Department held the additional charge of OSCB as its Management-in-Charge ( MIC) with
effect from 5th February, 2013. As per statutory provision, in case
of dissolution of management body
of OSCB, the Registrar of Cooperative Societies ( RCS), Govt. of
Odisha will be in charge of the Bank. But why and who took
the decision to appoint Sri Bishnupada Sethy as MIC
replacing Registrar of
Cooperative Societies needs to be enquired . There were no
policy or guidelines approved by RCS by which MIC would be eligible for various
benefits. However, it was observed that the Bank had reimbursed / paid book ( amounting to Rs. 10,000 per annum) ,
Electricity/ Energy Bill on actual basis
, orderly allowances ( at Rs. 3000 per month), and above all Incentive ( staff Rule No. 54-A) payable to employees
who are otherwise not eligible
for Bonus not exceeding 45 days
salary. Incentive paid stood at Rs. 1,70, 691 for
2013-14, Rs. 1,91,519 for 2014-15 and Rs. 65, 993 for 2015-16. Sri Sethy
not being staff member of the Bank as
per staff service Rules should not have
been paid the amount and all payments
constitute illegal. NABARD has recommended
to OSCB to review the payments.
During his tenure as MIC, he
had got reimbursed
medical bills in three phases amounting to Rs. 9,46,071 towards hospitalization of wife and father. There
were recommendations from Government for
reimbursement in two phases on budget constraints with the Department concerned and in one case there was no
recommendation from Government. NABARD has
recommended to OSCB and RCS
to determine the
entitlements of MIC , President and
Directors of the Board of the Bank to
make the institution run on the basis of rules , not discretion.
2.3. Fit and
Proper Criteria – Odisha Assembly was
misled
To a starred
Assembly question No. 1310, by
Shri Debashis Nayak, MLA , it was replied
by RCS vide letter No. 4892/ Bank -1 dated 24 March 2017 ( based
on feedback from OSCB) that OSCB had
posted its officers as CEOs to all 17 DCCBs who were
complying all fit and proper criteria prescribed by RBI vide its letter dated 3 March 2009. But the
fact is that of 17 names only 7 were DGMs of OSCB
and none of them had completed
8 years in that grade , at
the time of posting as CEO, as per
information made available by OSCB, to
be eligible for being posted as CEOs of RCBs. As per Staff Service Rules Rule No. 5, DGM
is the starting grade of Middle
Management and Manager ( Officer
Grade-III) and AGM ( Officer Grade
–II) being first two officer grades were to be excluded as per
the guidelines. Assistant Manager
( Grade-IV ) being a sub-Officer
/non-officer post as per Staff Services Rules to arrive at the Middle Management grade. The
information furnished to the
State Legislative Assembly was, therefore
false and misleading.
During inspection of NABARD, it was observed that none of the 17 DCCBs
complied with the fit and proper criteria
issued by RBI.
2.4. Fraud and
Forgery in Award of Contract for
computerization to VSoft Company
Pursuant to a number of complaints
received on computerization relating to CBS ( Core Banking Solution) in
OSCB, DCCBs and PACS ( Primary
Agriculture Cooperative Societies) ,
NABARD had conducted inspection about it. It was as
follows.
The Tender process
started with RFP in September
2010. The technical bids were collected
on 14 January 2011. In terms of the Special Committee Proceedings ( 10 February 2011), Technical and Commercial bids were given weightage and approved
after deliberations at 80:20 ( 80
% for Technical and 20% for commercial), which was considered to be quite robust as against industry standard at 70:30. To ensure
quality CBS. It was
suggested to refer the decision to consultants. A CBS software (
Core Banking Solution Software) demo was organized
on 8 July 2011 with participation
from 14 selected officials of the Bank. VSoft company along with two others had failed
to demonstrate as per tender documents and there were very serious shortcomings raising queries / questions on their CBS modules. Only TCS
and Polaris demonstrated
satisfactorily as per
specifications in their tender
documents. Without express
reasons, the views of the
committee was overlooked
and VSoft , on the other hand , were
handed the committee’s’
shortcomings chart in respect of the
company for improvement instead
of the bank rejecting the tender
outright on technical grounds as per Bid evaluation Criteria( at B6 of
RFP). Meanwhile , the commercial bids were opened on 30 August 2011. The Evaluation of weighted techno-commercial score was changed from
80:20 to 30:70 ( 30% Technical, 70% Commercial) resulting in VSoft becoming L1.
There was no pre-announcement of the
revised techno-commercial matrix. The drastic modification giving primacy to
price and relegating the technical
to secondary status in evaluation parameters had no basis and the consultants’ detailed
opinion / views on the subject were out
of the record except a cursory
statement in the proceedings of the special committee dated 30. August 2011. As per
technical evaluation conducted by Technical Committee on 21.7.2011,
VSoft, Polaris and TCS were awarded 146,
150 and 175 out of 200 points respectively. On the aspect of technical presentation
marks awarded were 15,16 and 18 respectively, though as per the
presentation minutes while TCS and
Polaris came out satisfactorily , VSoft
failed to convince the committee as the software was not as per the tender documents. However, for completeness
of overall solution marks awarded were
33, 37 and 42 respectively in the matrix. There was apparently inconsistency between the
Committee’s assessment and
the proceedings of the 8th July 2011 demo. At 14-member CBS Committee which treated
the software of TCS and Polaris
as “ satisfactory”. There was no convincing effort in the Technical
Committee proceedings to justify the
counter view. The marks awarded
to VSoft is , therefore a kind of window dressing.
A group of 10 members of the Management Committee (MC) had submitted dissenting note with respect to MC
RESOLUTION ON MEETING DATED
25.1.2012 bringing to fore a series of
issues on CBS implementation. But the bank had never examined or considered for redressal of their complaints , although the issues
pointed out in their dissenting
note were quite serious. Even TCS and Polaris had
also complained vide letters dated 13 September 2011 and 30 November
2011 respectively against irregularities in award of contract. Allegations were serious but no action had been taken on the complaints in question.
Questionable Advance Payments
to VSoft Company- The VSoft was provided
advances of money amounting to Rs. 1,00,00,000 on 2 July 2014 and Rs. 19,85,000
for VSAT and Rs. 13,44,000 to Trend Micro
on unknown dates ( during 2013-14
) as per the records of payment available with DIT. The advances had no other details and no one in the bank
had any knowledge as to
their final settlement. On different
dates between the period 7 April 2018 to August 2018, the bank had
paid advances of Rs. 8,69,43,913 to VSoft as advance over and above CBS contract amount and outside the agreement. The details of
payments and purpose is
not available with the vouchures and DIT is
also not aware of the most of the
purpose of payments.
2.5.PACS
Computerisation- Another Mega Scam
In November 2012, State
Government decided for installation of
desktop computer system in around 2700
PACS ( Primary Agriculture Cooperative Society)
engaged in paddy procurement and an instruction was issued to the respective DCCBs ( District Central Cooperative Banks)
to purchase and supply desktop computers for them.
All of a sudden, on 20 December 2012, OSCB reversed its decision
and advised DCCBs to keep in
abeyance the earlier order as OSCB had decided to make direct purchase of desktops and supply them to PACS . During
March 2013 , OSCB made a mega purchase of desktops and printers for all
PACS and recorded the cost
from the latter, by debiting the
current account , without consultation
or consent , citing a resolution of a meeting
not having any relevance to
direct purchase by OSCB , without assessing
availability of necessary infrastructure like proper house, electricity, availability of computer operators etc. at PACS. Many of these computers and
printers were lying idle even for years in the PACS in delivery
cartoons after supply heading to
obsolescence. PACS also faced
problem of installation, operation and warranty.
The State Government
had extended the services of Shri T.K.Panda as MD , pursuant to a
letter dated 28 May 2014 from OSCB’s CBS
consultant ( based on a flimsy appeal from OSCB Employee’s union to the
Consultant) recommending to the MIC ( Management-in-Charge) for retaining the service of current MD
for an appropriate period
so that the projects may
be completed. Thus, Shri Panda’s continuance was
required for successful implementation of PACS computerization programme.
For this the State had
provided financial assistance of Rs. 48.77
crores to OSCB. The PACS
computerization had hit a dead
end by March 2018. Most of the PACS, where data migration had occurred and the societies
reportedly gone online , had
since reverted to old ledger
system due to host of issues like lack of connectivity, software snags, poor
and improper migration of data, inadequate data on the system post migration
etc. Further, PACS CBS system did not
allow day end without closure of daybook keeping daybook open
for days and months and indulge in backdated entry
in the daybook was a long held cooperative practice. Incidentally,
the Government had fixed
the deadline for PACS computerization as 31 August 2016. It was surprising that , despite having
consultants on bank’s roll ,
without proper assessment of connectivity
issue and technology requirement and necessary preparation of migration, the
bank had launched CBS for 2700 PACS. The
action on consultant’s recommendation
for continuance of Sri T.K.Panda as MD not only yielded no result , but also
in retrospect the Consultant’s suggestion to MIC in reaction
to the Union’s plea , which
appeared like a managed event , was unwarranted and irrelevant to ( technical) consultancy work. No doubt, the
consultants had their share of
blame for the crippling CBS issues manifesting
for several years without
solution in OSCB, DCCBs and PACS.
2.6. Mobile Van
Banking Services - A testimony of
Mindless expenditure
The Bank had introduced
Banks on Wheels ( mobile
van for banking service) to provide
doorstep banking in unbanked areas, by
allotment of 20 mobile vans with
ATM service etc. to DCCBs under RKVY ( Rashtriya Krushi Vikash Yojana)
involving expenditure of more than Rs. 6 crores. It was inaugurated by Chief Minister on 9 September 2015. The service
had since been discontinued some
three years back due to inadequacies in software, lack of connectivity, and poor management by DCCBs and OSCB. The
RCS vide his letter No. 13267
dated 10 August 2017 advised OSCB
that the standing committee
on its tour had found the mobile
banking service vehicle lying
unused and idle at
Malkangiri and expressed
concern. NABARD has
recommended to bank to take
appropriate action and ensure
the purpose for
which the vehicles were
acquired are put to use and
benefit derived by the people
at unbanked areas / Gram panchayats.
2.7. RuPay
Kishan Credit Card (KCC)- A case of
Forgery and Wastage of public money
As per the VSoft’s PACS CBS
design, the KCC borrowers holding RuPay KCC were required to open SB account with the respective branches of DCCBs which were technically required to be mapped
to the related KCC loan accounts
held with the PACS ( Primary
Agriculture Cooperative Society). As and when
the KCC borrower pushed EMV chip enabled RuPay card
into an ATM or POS connected to OSCB-DCCB-PACS database and entered
the amount of proposal loan , it
debited the like amount
to the KCC loan account in the
Kishan loan module of the
PACS CBS system and transferred the amount
to the SB account held with DCCB branch and
simultaneously , deducted
the amount from the SB account and dispensed the cash. This, however, did not happen seamlessly due to inadequacy and inconsistency of data
due to faulty data migration, acute absence of
connectivity and multiple
software glitches. Thus, RuPay
KSS had not been a success
possible CBS of branch account
in respective DCCBs.
It was observed
from allegation of Sri Mahendra Kumar Nayak, Director on the Board
that in the Board meetings dated
06 January 2017 and 31 March 2017 , reasonable objections were
raised against placing orders with the Madras security Printers
for printing EMV Chip based RuPay
ATM Cards. It was decied
to call for open tenders with publication of the tender requirements in an English daily and to place
order for printing of cards to
the lowest bidders. But later the resolution had been recorded in an altogether different way
as per the proposal in the
agenda and to call for
Letter of Intent( LoI) from the
approved printers of NPCI for the
purpose of price discovery. It was added
that if the Madras Security Printers failed
to deliver the cards as per schedule, the agreement would be
cancelled and fresh quotations
would be invited from the
printers for printing of cards. Neither members of the Board were informed about the previous agreement/ arrangements , if any nor about
the value of above orders for
printing of ATM cards. It was learnt that Managing Director on his own had
placed orders with
the Madras Security Printers and only for the
purpose of price discovery an LoI
was invited from approved
printers of NPCI and Managing
Director had made the resolution of his own accord.
2.8. Customer Grievance & RTI -
A Dead Horse
The Bank had not put in
place a suitable policy
for improving customer services in the
Bank/s branches with the approval
of the Board and ensuring its
implementation as advised by NABARD vide circular no. NB
DOS.POL.1004/J. 1/2007-08 dated 12 July 2007.
The Branchs did not have
a system of recording the
customer’s grievances. In case any
complaint was received by the
branch, it was marked to an officer to redress
the grievances. However no follow
up action was taken thereafter.
Branches have
not yet displayed the name
of Public Information Officer
under the RTI Act as well as
the abridged version of
bank’s latest balance sheet in the branches
for information of customers as per
extant instructions of
appropriate authorities. It was observed
by Inspection team that there
were 10
appeals on RTI Applications pending with
the 1st Appellate
Authority as on the date
of conduct of inspection of which 6 were pending
for more than 5 months and the remaining for
about 2 months. The reason for pending appeals were
not on record and unknown.
2.9. Excess/ Irregular Claim of Interest Subvention
from Govt. of India and Govt. of Odisha
During course
of inspection by NABARD, the
claims made by the Bank
under the GOI scheme for interest subvention and GOO
scheme for cost-cum-Interest Subvention on crop loans were examined. On scrutiny of interest subvention claims made by the bank on behalf of STCCS it was
observed by NABARD
that the bank had made an excess
claim and received subvention of Rs. 5661.77 lakh. NABARD has
recommended for refund of
the said for the year 2016-17
of which
the shares of OSCB and DCCBs were
Rs. 2105.19 lakh and Rs. 3556.58
lakh respectively. The Bank had
lodged its Cost-cum-Interest Subvention
claims with Govt. of Odisha and
had received excess interest
subvention of Rs. 11296.26 lakh from GOO
for 2016-17. NABARD recommended
that OSCB, DCCB and PACS are
required to refund Rs. 10478.17 lakh, Rs. 1891.70 lakh and (-)
Rs. 1073.61 lakh respectively. The excess
and irregular claim resulted
from to the fact that the bank has added , contrary to provisions,
additional ST-SAO ( short term Agriculture operation crop loan) borrowing product ( borrowings obtained from NABARD)
and DCCB borrowing product (
borrowings obtained from OSCB by DCCBs)
to the actual Ground Level crop loan product.
2.10.
Visit
Sponsored by HDFC Life:
OSCB made a request to the
Registrar vide letter dated 23 October
2018 to accord permission in favour of President to undertake a fully paid foreign visit sponsored by HDFC
Life during November 2018. This was forwarded
by RCS to Government in Cooperation Department for consideration. However,
without prior permission the visit was conducted which as per existing norms required Government clearance.
Incidentally, HDFC Life was the company that
managed the Leave Encashment Fund of OSCB. In the interest of developing
ethics and integrity of the highest
order in the institution's operations and decision making, the bank may desist
from accepting freebies or similar offers from its service providers or partner
agencies. OSCB may also take up with RCS to develop code of conduct in this regard for official and non-official
functionaries.
2.11. Disqualification of Director for Commercial Interest
The RCS vide letter No.3692
dated 14 February 2019 had advised OSCB that Orissa Express group of newspapers was
awarded advertisement costing 37.18 lakh for publication of orders of
arbitrators in Dispute Cases during the period from 2008 to 2017. It was established
through enquiry that the then MD, OSCB had shown "highest
inclination" (sic) to the newspaper, Odisha Express, wherein one, Shri
Ambika Prasad Das, Director on the MC of the bank, was the Executive Director.
As such, transactions attracted disqualification as Director of the bank under
Sections 28(3) and 28(3)(f) read with z8(3-aa) of OCS Act, 1962 and the Byelaw
No. 26 (6-a) of the bank. OSCB vide letter No.8115 dated 25 February 2019 had
advised Shri Das that he had incurred
disqualification and, accordingly, dismissed him from the Board. However, shortly thereafter, the Government
in Cooperation Department vide letter No.1350 dated 22 February 2019 had
directed OSCB "not to take any action on report of RCS until further
orders." Meanwhile, during inspection it was brought to notice that the
Odisha Express, where Shri Das is an Executive Director, was awarded by OSCB
ads directly or through an ad agency more than 10 lakh between FY 2013-14 to
2017-18. As commercial interest of the Director with OSCB was beyond doubt,
action as per the provisions of the law must follow without delay. OSCB may
take up with the Government and RCS for prompt action.
Pradip Pradhan
RTI Activist & State Convener, Odisha Soochana adhikar Abhijan
M-9937843482
Date – 28.6.19
.
