RBI fines 12 banks Rs 1.5 crore for Deccan Chronicle default

Written By kom nampultig on Jumat, 25 Juli 2014 | 22.23

MUMBAI: Reserve Bank of India has fined 12 banks Rs 1.5 crore ​​for not following proper guidelines in advancing loans to the Deccan Chronicle group which has defaulted to the extent of Rs ​4000 crore.

​The Reserve Bank had carried out a scrutiny of the loan and current accounts of Deccan Chronicle Holdings Ltd., in certain branches of these banks in late 2013. Based on the findings of the scrutiny, the Reserve Bank issued show cause notices to these banks in March 2014, to which the individual banks submitted written replies. " After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc., by some of the banks before its Committee of Executive Directors, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty," said RBI in a statement.

The 12 banks that have been fined are Andhra Bank (Rs 10 lakh), Axis Bank (Rs 15 lakh), Canara bank (Rs 10 lakh), Corporation Bank (Rs 10 lakh), HDFC Bank (Rs 5 lakh), ICICI Bank (Rs 40 lakh), IDBI Bank (Rs 15 lakh), IndusInd Bank (Rs 10 lakh), Kotak Mahindra Bank (Rs 10 lakh), Ratnakar Bank (Rs 5 lakh), State Bank of Hyderabad (Rs 10 lakh), and Yes Bank (Rs 10 lakh)as determined above.

What was unusual about the loans was that these advances were not backed by enough security. The mortgaged assets are expected to fetch a third of the loan exposure. Secondly, most of the lenders were unaware of the extent of leverage by the company and the exposure of other lenders to the group. Sources said that RBI was shocked that advances were made by lenders without speaking to each other.

​T​his action is not intended to pronounce upon the validity of any transaction or agreement entered into between the concerned bank and the borrower the central bank said.​

​In July, Canara Bank, which has an exposure of Rs 350 crore to Deccan Chronicle, said that the company's promoters had approached the bank for restructuring. However the bank had asked for a one-time settlement as the promoters might not be in a position to meet the huge funding requirement.

Last year the Central Bureau of Investigation had filed a case of cheating, fraud and criminal conspiracy against Deccan Chronicle Holdings chairman T Venkattram Reddy, vice-chairman and managing director T Vinayak Ravi Reddy , vice chairman PK Iyer as well as the company's auditors CB Mouli & Associates.

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