Export company director main accused in Rs 3.5 cr bank fraud

 

In an alleged fraud case of Rs 3.5 crore involving an 

 Ahmedabad-based import-export company, the city police

has stated that the investigation of bank records pin down

one of the directors of the company as the main accused.

Moreover, the investigations show that the company —
Sri Aditya Import-Export Ltd — existed only in name.

According to police, Narendra Chaudhary, one of the
directors of the company, had deposited a bogus
cheque shown as issued by a Mumbai-based company
into Sri Aditya’s current account in Bank of India’s
Navrangpura branch on March 6. Next day, he
transferred the money to his savings account in the
bank’s Bhadra branch and converted it into a fixed deposit.

On March 8, Chaudhary took a company
loan of Rs 3.5 crores and reportedly went missing.


On March 9, the bank came to know about the fraud
and lodged an FIR against the company.

Navrangpura police said Sri Aditya Import-Export Ltd
was started by one Hemlata Mangtani and Rahul Mishra in partnership.

Mishra reportedly asked his friends Narendra
Chaudhary and Shantilal Jain (both accused) to join the
company a year ago.

Inspector P M Parmar, who is investigating the case,
said, “There were differences between Mangtani and
Mishra over finance matters. Both parted their ways
and Mishra moved to South Africa soon after the company
got registered.

Later, when Chaudhary and Jain joined, the company
existed just in the name and did not have even a bank
account of its own”.

Parmar said: “Chaudhary opened a bank account of the
company with Bank of India in September.

The accused had transferred company money
to his account with Bank of India

While Mishra continued to be one of the directors
in the company, he practically never worked for it.
Jain assisted Chaudhary who handled most of the
finance-related matters of the company.”

He further added, “We have investigated the company’s
bank records. The fraud was planned and executed by
Chaudhary while Mangtani and Jain did not have any role in it.”

The police are further investigating the matter.
http://bankfinanceindia.blogspot.com/

Yes Bank paid Rs 73 Crs as Advance tax

 

New-generation private sector bank, Yes Bank, 

has paid an advance tax of Rs 73-crore for FY 10, 

up 48.98 per cent over last year's figure.

In FY 09, the bank had paid Rs 49-crore, a press release issued here said.

http://bankfinanceindia.blogspot.com/

SIX cost accounting standards mandatory from 1st April ,2010

 

Mar 14, 2010

Ten cost accounting standards have been formulated,
six of them are mandatory, which will come into effect
from April 1 and three more are likely to be added, 
according to Mr K. Narasimha Murthy,
Director of IDBI and LIC Housing Finance.

He was delivering the key-note address at a seminar on ‘Effective corporate environment — best practices for costing,’ organised here on Friday by the Institute of Cost and Works Accountants, Visakhapatnam chapter. Mr Murthy was a member of the Goel Committee appointed by the Union Government to make recommendations for laying down cost accounting standards.

He said in all, 28 cost auditing standards may come into force in the next two years and it would make for better cost auditing.

India did not have a cost audit for government expenditure. “The importance of a cost audit cannot be overemphasised and in most countries there is a strict cost audit even for Government expenditure. The Government is the biggest spender and, therefore, cost audit is absolutely essential,” he said.

He said in a globalised economy, business cycles were becoming frequent and it was becoming increasingly difficult to foresee demand and supply for any product. Therefore, cost-cutting was of the essence.

He called for good corporate governance and performance governance to maximise stakeholder value. There was also need for effective risk management systems.

Mr Ajeya Kallam, Chairman of the Visakhapatnam Port Trust, said costing was not given much importance, especially in the public sector units.

The decision to merge the Dock Labour Board (DLB) with the Visakhapatnam Port Trust (VPT) was one such decision when costing was not taken into account, he said.

The port was served a notice for paying Rs 30 crore in income-tax soon after the merger. The DLB had to pay the IT and apart from that, the VPT had to set apart Rs 100 crore for wage settlement. After all that, it was found to be unviable and the workers had to be given VRS. “It was a political decision imposed on us from above with no regard to the costing norms,” he said.

Mr Satyananda Rao, Chairman of the Vizag chapter of the Institute of Cost and Works Accountants, also spoke on the occasion.

 http://bankfinanceindia.blogspot.com/

Not all finance firms want to be banks

By Sarbajeet K Sen Mar 14 2010 , New Delhi

Not many eligible non-banking finance companies (NBFCs)

 seem keen on turning into banks, even

after the budget said new licences could now be given

 for starting banks.

Three large NBFCs, including Sundaram Finance,
 Manappuram Finance and Muthoot Pappachan, told  that
they were not considering a move to become banks.

The reason was what they called the “restrictive” regulatory
framework for the banking sector. This makes banks a not so attractive proposition.

Representatives of the Finance Industry Development Council
(FIDC), the apex body for asset finance companies (AFCs) which
holds 70 per cent of the country’s NBFC assets, agreed that finance
companies might face more shackles if they were to turn into banks.
They feel more comfortable with the free play that an NBFC enjoys in
 relation to banks.

In his budget speech, finance minister Pranab Mukherjee said
that the Reserve Bank of India (RBI) was considering grant of
fresh bank licences. He specifically mentioned NBFCs as a category
that might be given licences to bring about greater competition
in the banking sector. RBI is in the process of drafting fresh norms for
grant of new bank licences.

Raman Aggarwal, FIDC co-chairman, cited feedback from the industry-segment
that he represented to say that not many AFCs were interested in
applying for bank licences. “Only a few AFCs such as Shriram
Transport Finance are looking at the option.
Other than restrictive regulatory issues such
as those on directed lending, NBFCs may not find it
economical to convert into banks. There are massive
expenses in terms of skills and technology needed to
offer services such as ATMs, credit cards and anywhere banking,” he said.


According to the economic survey 2009-10, 330-plus AFCs hold 70.3 per
cent of the total assets and liabilities of India’s over 12,700 NBFCs in India.


The Chennai-based Sundaram Finance is not looking at the option
as “we do not have the ambition (of becoming a bank),”
according to its managing director, TT Srinivasaraghavan.

 “We see no great advantage in becoming a bank,” he said.


He said his company would prefer to consolidate its core
businesses. “Our core competency is in areas such as
financing of trucks and cars. If we intend to go into
other areas such as project financing, trade financing,
 then it may be a good idea to become a bank. But if you
see universal banks like ICICI Bank, SBI and others, what
great value an NBFC-turned-bank can offer is not clear,” he said.


VP Nandakumar, group chairman of Manappuram Finance, a
 big Kerala-based company, said, “One has to look at core
strengths. Our core competency is loan against jewellery
 through our 1,000 branches. Some NBFCs have competency
in vehicle finance, some in infrastructure finance,
some other in mortgage finance. How an NBFC can leverage
 its core competency after becoming a bank is not clear,” he said.

He said NBFCs would be wary of the regulatory issues such
as compliance with priority sector regulations, CEO appointments
and the holding pattern in banks. “How would an NBFC that
 becomes a bank scale up priority sector lending to 40 per cent
of its net credit in a short time is an issue. Also NBFCs have
 a free hand in appointing top officials such as CEOs.


As a bank, it has to get RBI clearance.

Besides, the equity holding pattern and voting
rights are very restrictive for a bank,” he said.


Thomas George Muthoot, managing director of the Muthoot
 Pappachan group, another large Kerala-based NBFC, which
is into gold loans, consumer finance and auto loans, said
 that he was not keen on becoming a bank.

“There are good opportunities for NBFCs, specially
those with strengths in rural areas. We have more
flexibility than banks in terms of expanding our branch
network and dealing with customers. Most often in lending deals,
it is not a question of interest rate but really a case of getting
credit at the right time. Good NBFCs are able to offer a better deal
in this regard,” he said.

Other than Shriram Transport Finance, NBFCs whose
 names are doing the rounds as possible aspirants to
 bank licences are IFCI, Reliance Capital, the Indiabulls
 group, the Religare group and LIC Housing Finance.

JPMorgan, Citi and the destruction of Lehman Brothers

March 12, 2010

JPMorgan and Citigroup helped cause the collapse 
of Lehman Brothers by demanding more collateral and changing guarantee agreements, the bankrupt bank’s examiner says.

The court-appointed examiner also said in a 2200-page report published overnight that Lehman used accounting gimmicks and had been insolvent for weeks before it filed for bankruptcy in September 2008.

“The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity pool,” said Anton Valukas, the US Trustee-appointed examiner, in the report filed in Manhattan federal court. “Lehman’s available liquidity is central to the question of why Lehman failed.”

Former Lehman chief executive Richard Fuld, former chief financial officer Erin Callan, former executive vice-president Ian Lowitt and former managing director Christopher O’Meara certified misleading statements, the report said.

Mr Fuld was “at least grossly negligent,” the report said. Lehman collapsed with $US639 billion in assets, the biggest bankruptcy in US history.

Commenting on Barclays’ purchase of Lehman’s North American brokerage, Mr Valukas said a “limited amount of assets” belonging to Lehman were “improperly transferred to Barclays.”

The examiner said that while some of Lehman's management's decisions "can be questioned in retrospect" and the firm's valuation procedures for its assets "may have been wanting," those responsible for the firm had used their business judgment and were largely not liable for the firm's collapse.

He did not find that Lehman's directors had explicitly violated their fiduciary duty.

However, in the report the examiner also revealed explosive allegations about a gimmick, known as "Repo 105," that was used for the sole purpose of manipulating Lehman's books.

The examiner concluded that the gimmick, which dated back to 2001 and was used without telling investors or regulators, gave the appearance that Lehman was reducing its overall leverage levels in 2008 when in reality it was not, partially leading to its collapse.

The examiner said there was also sufficient evidence to support a possible claim that the firm's auditor Ernst & Young had been "negligent."

Barclays and JPMorgan declined to comment and a Citi representative had no immediate comment. A spokesman for Ernst & Young did not comment, saying the firm had not yet had time to review the findings.

The report was completed in February and was allowed to be unsealed by the bankruptcy judge overseeing the case earlier on Thursday.