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Business News/ Industry / Bank of Baroda detects Rs350 crore bill discounting irregularity
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Bank of Baroda detects Rs350 crore bill discounting irregularity

The bank has initiated an investigation into it and suspended one person

The bank did not disclose the name of the company and other details. Photo: Pradeep Gaur/MintPremium
The bank did not disclose the name of the company and other details. Photo: Pradeep Gaur/Mint

Mumbai: State-owned Bank of Baroda (BoB) has detected 350 crore bill discounting irregularity and initiated an investigation into it. “Yes, bills worth 350 crore were discounted but the payment has not come. The concerned person has been suspended," said a senior official of BoB. “We have already initiated an inquiry and based on the report we will take further actions," the official added.

The bank did not disclose the name of the company and other details. Bill discounting is a transaction under which a firm sells its accounts receivable at a discounted value to banks or a factoring company. Selling of an account receivable at a discounted value helps a company to meet its working capital requirement without resorting to borrowing.

In such transactions, a fraud can take place when there is mala fide intention of buyer and seller, and the transaction is not honoured. In some cases, there are genuine reasons like product defect and financial crunch but in recent past many frauds have also surfaced leading to rise in bad loans of the bank. In case the bank is unable to recover the amount, it adds to its gross non-performing assets (GNPAs). In the first quarter ended June, BoB saw its asset quality worsening with GNPAs at 4.13% as against 3.11% a year ago. Net NPA level declined to 2.07% from 1.58%. Fresh slippages in the quarter stood at 1,685 crore from 1,881 crore a year ago. It restructured 147 crore worth of accounts in the period. GNPAs of public sector undertaking banks at the end of March quarter stood at 5.20%. Shares of BoB closed at 184.55, down 1.10% on the BSE on Tuesday.

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Published: 06 Oct 2015, 07:34 PM IST
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