How-to-build-NPAs-300x75How-to-build-NPAs-300x75At the annual review meeting of the finance minister with heads of public sector banks on 6 May, Arun Jaitley said the government will protect from scrutiny of investigative agencies banks that enter into “commercially prudent” settlements to clean up bad loans. The fact that PSUs have run up more than Rs 4 lakh crore of non-performing assets (NPAs) is a crying indictment of the fact that banks have been anything but “commercially prudent” in lending to big corporates. The recent snafu by Bank of Baroda in freezing the accounts of Manmohan Singh, a Uttar Pradesh farmer, for being a “guarantor” for Vijay Mallya’s loan, goes to prove that the imprudence in lending is matched and compounded by the shoddy, casual approach in recovering the same bad loans. This case was dismissed as a technical error by BoB. Firstpost dug deep to understand how this ‘technical error’ might have occurred. This series of reports, which attempts to give you a peep into why and how these NPAs are created in the first place, will also demonstrate why the finance minister’s offer of constitutional protection for banks from “commercially prudent” settlements should be extended extremely prudently.

On to the second part:


Radheshyam Gupta Building exteriors

Building where Subhash R Gupte lives

Flat number 506 in a Slum Redevelopment Authority building in Vile Parle East, Mumbai, is hardly the place you would expect a director of Kingfisher Airlines to live.

But if you were an officer of Bank of Baroda, trying to salvage whatever you can from a Rs 550 crore loan to Vijay Mallya that has gone horribly bad, this is perhaps where you would have ended up looking for Subhash R Gupte, former acting chairman and managing director of Air India. Gupte, a seasoned aviation professional, was till recently on the board of Kingfisher Airlines and is, according to the bank, a guarantor to the loan. (Gupte resigned from the Airline board on 2 April 2014.)

Perhaps, we have overstated the bank’s inclination for due diligence. It is more likely that you would have landed up at this address if you were a reporter. For Bank of Baroda there was the easier option of freezing the bank account of Subhash R Gupta, 24 — who lives in this flat and earns his living as a security guard at a Kandivli facility — assuming he could be Subhash R Gupte, 76, director of Kingfisher Airlines!

Ganesh R Gupta in the foreground. Younger brother Subhash, whose account with Rs 93 balance was put on the freeze-list by the BoB is partly visible.

Ganesh R Gupta in the foreground. Younger brother Subhash, whose account with Rs 93 balance was put on the freeze-list by the BoB is partly visible.

Just like in the case of Manmohan Singh, the farmer from Uttar Pradesh’s Khajuria Naviram village whose account was frozen assuming he was Manmohan Singh Kapur, another independent director on Kingfisher Airlines board, in this case, too, the bank exercised the easier option. It just put a lien on his account.

Here is how it happened. In December 2015, when it became clear that Vijay Mallya was unwilling to pay up the Rs 9,000 crore he owned to a consortium of 17 banks led by the State Bank of India, BoB which had lent him Rs 550 crore, put out a list of nine names and directed various branches in India to put a lien on their accounts (freeze).

At item number 5 on the list was Manmohan Singh. The savings account number listed against this name was 164101000xxxx7, account balance Rs 1,277 and branch Nand, Pilibhit (Uttar Pradesh). It was frozen on 15 December 2015. Manmohan Singh’s name corresponded with that of Manmohan Singh Kapur and that’s how, BoB explained, the goof up occurred: “The accounts under reference were erroneously lien marked by the bank, owing to similarity of name and few credentials with the guarantors of Kingfisher Airlines. However on realising this, the bank took swift action to reverse the lien on these accounts and funds are made available to the customer immediately.”

Technical errors can and do happen, but what followed on item number 9 on the list would make it difficult to cut BoB any slack. At item number 9 was the name of Subhash R Gupta. His savings account number in BoB’s Bandra branch, Mumbai, was listed as 038401000xxxx1 with a balance of Rs 93. Yes, all of rupees nine….three…. ninety-three! His name, as already pointed out, corresponded with Subhash R Gupte, a member of Kingfisher Airline board.

That’s not all, at item number 6 was the name of Subhash Ramdulare Gupta, at item number 7 was another Subhash R Gupta and at item number 8 yet another Subhash R Gupta, all of them with savings accounts/fixed deposits with the Khar branch of BoB. The balances in their accounts are way healthier than the earlier two accounts cited, but nothing to suggest that they may have the capacity or the audacity to stand guarantee for a loan of Rs 550 crore to Vijay Mallya.

Here is the document, showing all the names, including that of Vijay Mallya and three of his kin:

Manmohan-Singh-Document (1)

That is one “technical error” too many for one letter to be riddled with. And this was no ordinary case. This was about recovering a Rs 550 crore loan to Mallya at a time he was making national headlines. The stink was too strong for us to ignore.

So, we set out to find the real identities of all the Guptas named in the bank’s freeze-list. We first landed up at the bank’s Bandra branch where Subhash R Gupta, 24, had his account (038401000xxxx1). That the bank would cite client privilege to deny us information about him, was a no-brainer. So we spun a story. We claimed we had stood guarantee for Subhash R Gupta in a loan he had defaulted on. We requested the bank to give us his contact details so that we could pursue the matter with him. After being denied any help for about an hour, we ran into a person who knew Gupta. He reluctantly gave us Gupta’s mobile number.

We called Subhash R Gupta. A young voice answered the phone. He said he was Subhash R Gupta, a security guard in a Kandivali facility. Upon being told that his name had appeared on a list of director/guarantors of Vijay Mallya’s humungous loan, he was confused more than shocked. He did not know Vijay Mallya, much less about his loans or being guarantor for one of them. He confirmed he had an account in BoB’s Bandra branch, he also confirmed the account number as his. Bingo!

We told him we would like to meet him to clarify this matter. We reassured him — because we knew that was the reality — that he had nothing to worry about. It was a mistake on the part of the bank and it could be easily rectified.

The entry door to Subhash Gupta's father Radheshyam Gupta's flat.

The entry door to Subhash Gupta’s father Radheshyam Gupta’s flat.

Early next morning we landed up at his Vile Parle house. Subhash R Gupta’s elder brother Ganesh R Gupta spoke to us from a half-open door. He was extremely unwilling to talk to the media. He did not wish to be photographed either. Cameraman Jonathan kept his camera rolling and we could catch glimpses of Subhash Gupta behind Ganesh. He peeped out only once to tell us excitedly, “Wait a minute. There is no signature of mine on this paper. How did my name appear on this then?”

Ganesh Gupta told us exactly what we had anticipated to hear from him. Subhash Gupta opened the account in August 2014 to avail of the insurance scheme under the Pradhan Mantri Suraksha Bima Yojana. Subhash has not operated the account or visited the branch in a long time. The bank did not inform him about the freeze order on his account. And, of course, they had no idea who in the heavens was Vijay Mallya.

Listen to what Ganesh R Gupta and Subhash R Gupta told Firstpost:

That only solves the mystery of one Gupta out of the four named in the list. If Subhash R Gupta, 24, security guard and resident of Flat no 506 was mistaken for Subhash R Gupte, the director on the board of Kingfisher Airlines, where was the need to repeat the mistake three times over? Three other Guptas — Subhash Ramdulare ( SB a/c 039901000xxxx8), Subhash R Gupta (FD a/c 039903000xxxx2) and Subhash R Gupta (FD a/c 039903000xxxx1), all have their accounts in Khar. We were told at the branch that these three accounts were held by three different individuals (as opposed to three accounts held by one person). That may or may not be accurate, it is for the bank to clarify, but the fact remains that on a list ordering the freezing of accounts for a Rs 550 crore loan default, the bank mixed up the names of very important persons with very regular persons. And did that many times over.

Can this be passed off as a regular technical error? What is the import of this string of errors? What does it say of the processes and procedures for giving big loans to big corporates?

We will examine all this in the following part of this series on the great Vijay Mallya loan puzzle of BoB.

Disclosure: For some portions of the investigation, Firstpost correspondents withheld their identities and used sting cameras. Since the purpose was to gather facts that expose lack of due diligence at the top echelons of the bank rather than compromise officials at the lower end of the systemic chain, we are playing only the audio of key conversations and using just one freeze-frame of Subhash R Gupta.


Vijay Mallya loan part 2: BoB freezes a/c with Rs 93 in quest for Rs 550 crore!