Mumbai: The Indian Banks’ Association (IBA) on Friday condemned the arrest of Bank of Maharashtra (BoM) chief Ravindra Marathe, along with his officials, on charges of illegally sanctioning a loan of Rs100 crore for a real estate project of a DSK Group company.

The arrest was unwarranted and the allegations of violating Reserve Bank of India guidelines made against the officials are inaccurate, the industry body said at a press conference after a meeting of bankers.

“All bankers unanimously expressed anguish and concern for what has transpired for bona fide decisions taken in discharge of official duties," said V.G. Kannan, chief executive officer, Indian Banks’ Association. “Senior officials of banks have been arrested for criminal conspiracy and in violation of Maharashtra Protection of Interest of Depositors in Financial Establishment Act, 1999, which is not applicable to banks. Bankers are not concerned with activity of taking and repayment of deposits by companies and hence the arrest is unwarranted."

Kannan said IBA would submit a memorandum proposing the setting up of a committee under an RBI official to give clearance to allow proceedings against officials under investigation. The memorandum will also propose an indemnity cover to provide legal assistance for these officials.

“The bankers while condemning this said that IBA should lead a delegation and make a representation to the highest authority by means of a proper memorandum," Kannan said. “Senior bankers from industry shall meet and present the issue seeking directions to avoid recurrences of such unavoidable incidences."

Kannan added that simultaneous investigation by different authorities reviewing the same decision of bankers has hurt the decision-making of bankers. IBA questioned the decision of the Pune State Police to arrest Bank of Maharashtra officials as typically, frauds of more than Rs25 crore come under the jurisdiction of the Central Bureau of Investigation (CBI).

On Wednesday, the Economic Offences Wing (EOW) of the Pune Police arrested Marathe, former managing director Sushil Muhnot, executive director Rajendra Gupta and two other bank officials for allegedly colluding with accused D.S. Kulkarni to divert money and cheat depositors.

According to Kannan, BoM had sanctioned loans of Rs100 crore to DSK Limited and released only 16% of the share. Several other banks including State Bank of India and Union Bank of India were part of the consortium that had given loans to the same builder. The overall exposure of the consortium to DSK Group was Rs600 crore.

Kannan defended BoM’s decision stating that the bank had red-flagged the account and action was taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 to recover the dues. He added that the bank had a 20-year relationship with the company, which started facing problems post 2015, following the economic slowdown.