Apex Bank under cloud for sanctioning loan sans security

Part of loan credit to housing society helped clear developer's dues

As the investigation into the fraud related to gold loans at the District Central Co-operative (DCC) Bank in Shivamogga is nearing completion, an illegal sanction of loan in the Karnataka State Co-operative Apex Bank Limited in Bengaluru has surfaced.

The Shivamogga police had arrested R M Manjunatha Gowda, who had lost the 2013 Assembly elections from Thirthahalli and later re-joined Congress, in connection with the DCC bank case.

When Gowda was the president of the Apex Bank, Rs 10.43 crore out of the total sanctioned loan amount of Rs 30 crore was released to the Karnataka State Co-operators and Co-operative Institutional Employees House Building Co-operative Society, without any security. Gowda was also the founder director of the said Society.

The Society entered into a Joint Development Agreement (JDA) with KNS Infrastructure, which belongs to one K N Surendra, despite no amount being paid towards the requirement of sites by the members. Subsequently, the Society filed an application with Apex Bank, seeking loan to develop the layout. The bank swiftly sanctioned a loan of Rs 30 crore. The loan sanction letter dated March 15, 2013 shows that out of the sanctioned term loan of Rs 30 crore, the first instalment of Rs 10.43 crore was released even before the creation of the primary and collateral security.

It was released to pay the State Bank of India (Rajajinagar Industrial Estate Branch) so that the documents of the builder are released and they are mortgaged towards the loan of Rs 30 crore.

The loan sanction letter states, “Out of the loan amount of Rs 30 crore sanctioned to the Society, the outstanding loan amount of the developer with whom the society has entered into an MoU, KNS Infrastructure, is to be cleared by the bank by remitting an amount of Rs 10.43 crore to SBI. The balance loan amount will be released only after creation of charge on primary and collateral security.” A senior official of the Apex Bank said that the loan had been later regularised and the repayment had been regular.

However, activists who have been filing complaints about irregularities in the house building co-operative societies say both the Apex Bank and the Society have acted in violation of rules.

“When there is so much talk about Non Performing Assets in the country, here is one more example of how public money is squandered away. This transaction shows that the loan amount was reduced to Rs 20 crore by giving away Rs 10 crore to clear the loan of a builder in the other bank. This should also be probed from many angles since Gowda was at the helm of affairs in both the bank and the society,” social activist S R Hiremath said.