Mumbai: Audit and consulting company KPMG is conducting a forensic review on Bank of Rajasthan Ltd, a listed private bank.
According to a person familiar with the development, who did not want to be identified, the forensic review is being conducted to look into some alleged irregularities.
In an emailed response to Mint’s queries, Bank of Rajasthan claimed it has appointed KPMG to do “forensic audit to examine certain transactions at Lucknow, in the account of Sahara Group.”
The mail indicated that this audit was complete and added that “the report did not find anything adverse or any loss to the bank.”
Subrata Roy-led Sahara India Pariwar has interests in finance, entertainment, real estate and media.
The group’s flagship firm Sahara India Financial Corp. Ltd is the country’s largest residuary non-banking finance company. The group also publishes a Hindi-language paper that competes in some markets with Hindustan, published by HT Media Ltd, which also publishes Mint.
Abhijet Sarckar, head of corporate communications of the group, said: “Since there is no official communication (from Bank of Rajasthan and KPMG) with us, it will be not appropriate for us to give comment on this.”
A KPMG spokesperson declined comment, citing client confidentiality agreements.
A forensic review is essentially a forensic investigation and is conducted when financial irregularities are suspected in a firm. Such investigations evaluate damages caused as a result of negligence or deliberate misconduct.
India’s banking regulator, the Reserve Bank of India (RBI), had conducted a forensic review on Nedungadi Bank Ltd a few years back to probe its capital market exposure. Nedungadi Bank was merged with Punjab National Bank in February 2003.
The KPMG forensic team investigates issues related to kickbacks and bribes, financial misrepresentations, accounting frauds, fraud in loan portfolios, malicious mails, data theft and Internet frauds, credit card frauds and siphoning of funds.
Bank of Rajasthan has not yet announced earnings for the June quarter. Its net profit for the year ended March was Rs117.71 crore, marginally up from Rs115.19 crore in 2008. Its net non-performing loans as a percentage of loans in 2009 marginally rose to 0.73% from 0.42% a year ago. The promoter group’s holding in June stood at 30.54%.
Under RBI norms, the promoters are required to pare their holding to 10% in a bank. RBI norms insist that the minimum net worth or equity and reserves of a bank should be Rs300 crore. The bank’s net worth is Rs643.47 crore.
RBI has not given any fresh branch licence to the bank in the recent past. In its email, the bank said it has applied for 35 additional new branches and they are “under process”.
“In 1999, the bank was having 306 branches and in 2009, the bank is having 463 branches. In fact, the bank has opened 157 branches in these years,” it said in the email.
Bank of Rajasthan has also not appointed a chairman since August 2004 when RBI refused to renew the tenure of P.K. Tayal, its promoter, as non-executive chairman.
“Since the process for appointing (a) non-executive chairman is on, one of the board members chairs the meeting. (The) non-executive chairman does not enjoy any perks, salary or delegation of powers,” the bank said.
In September 2007, RBI had appointed two nominees on the bank’s board. They are Shekhar Bhatnagar and A. Madhavan. “In old private sector banks, Reserve Bank of India normally appoints nominees on the bank’s board and this is a practice adopted by the regulator in all the banks,” Bank of Rajasthan’s email said.
On the Bombay Stock Exchange, Bank of Rajasthan’s stock ended the day down 2.14% at Rs50.35 even as the exchange’s benchmark equity index Sensex lost 0.85% to close at 15,062.49 points.