“Fraud, Forgery and Financial Irregularities in Odisha state Cooperative Bank, Bhubaneswar”
-An Extract from Statutory Inspection Report submitted by NABARD-
(Exposed under RTI on 27.4.19 from the PIO, office of Registrar of Cooperative Societies, Odisha)
1. Introduction
OSCB scam is not new for the people as well as RTI Activists of Odisha who are spearheading campaign for effective implementation of RTI and to fight out corruption in the state. Earlier, huge corruption and irregularities in Odisha State Cooperative Bank , Bhubaneswar has been exposed under RTI several times and put in public domain for knowledge of the public at large. The expose of corruption and misappropriation of fund started with revelation of statutory audit Report of Odisha State Cooperative Bank presented by Auditor General, Cooperative Societies, Odisha on 30.9.2011. Armed with this Report and information obtained under RTI , many RTI Activists like Sri Ashok Nanda, Sudhir Mohanty, Biswajit Mohanty have filed series of complaints starting from to Chief Minister to State Vigilance. But astonishingly, no inquiry has been conducted since 5 years. Rather it has been suppressed and corrupt officers being awarded with promotion time and again to suppress scams. ( For details , visit link https://odishasoochana.blogspot.com/2018/08/inquiry-into-oscb-scam-worth-rs500.html.)
Recently, NABARD, Regional Office, Bhubaneswar has presented its statutory inspection report of the Odisha State Cooperative Bank Ltd. to State Government which was conducted from 14th February to 6th March,19 with reference to its financial position as on 31st March 2018 under Section 35(6) of the Banking Regulation Act, 1949 ( As Applicable to Cooperative Societies). All the issues pointed out by NABARD in their Inspection Report has justified earlier allegation of RTI Activists and complaints filed several times in this regard.
The Odisha State Cooperative Bank (OSCB) was registered on 2nd April 1948 and commenced its banking business on the same day. The area of operation covered the entire State of Odisha. The Bank was included in the second schedule of Reserve Bank of India, 1934 with effect from 2nd July 1966. The Bank had been granted license under section 22 of the B.R.Act, 1949 (AACS) ON 23.12.2009.
2. Major Fraud, Forgery and Irregularities in OSCB
2.1. Illegal extension of service to Sri T.K. Panda, Ex- MD ( Major irregularities and Fraud )
Under the staff service Rules, Sri T.K. Panda had attained the age of superannuation as on 31 October 2013 ( which was 58 years before revision), but continued in service after 1 November 2013 till 31 October 2015 ( two years) in violation of ( then existing ) staff Rules No. 42 and sections 28(3)(b)(1) and 33 –A of the OSC Act, 1962 under which RCS ( Registrar of Cooperative Societies) had not accorded approval which was mandatory. The RCS had raised queries on his appointment which were never replied by the bank.
However, RCS vide his order No. 14866 dated 21 August 2014 ( MC resolution 22 August 2014) had extended his tenure as Managing Director ( MD) UNDER section 28(3)(b)(1) for a period of 2 years from 1 November 2015 to 31 October 2017 , without post facto approval of the prior period, effectively making the said period of continuance of Sri Panda as MD untenable. Incidentally, the President of OSCB vide letters dated 13 June 2017 and 29 June 2017 had appraised RCS and Secretary, Cooperation citing provisions of old guidelines of RBI on fit and proper criteria dated 18 June 2008 instead of latest applicable guidelines dated 3 March 2009 and 5 July 2011 and requested for extension of Sri T.K.Panda as MD for further period of 3 years on the grounds that suitable officers complying with fit and proper criteria were unavailable in the bank whereas the actual position was contrary to the point.
Past History of forgery of Sri T.K.Panda
Sri Panda during his tenure as CEO of Keonjhar Central Cooperative Bank was instrumental in taking over the defaulted NPA loan of Sarthak Minerals ( owned by one , Bijayalaxmi Patnaik , w/o- Sura Patnaik , ( incidentally then headed Keonjhar CCB as President) from Bank of India , vide sanction order No. 6707 dated 31 March 1998, violating extant credit authorization norms and without examining credit worthiness of the borrower. It was further found that the present loan outstanding together with the interest was more than Rs. 3.50 crore which constituted major default to the bank worsening its financial position. Moreover , in letter No. 1575/Vig.Cell dated 3 April 2010, Government in General Administration ( Vigilance ) Department had forwarded the memorandum of article of charges , statement of imputation, memo of evidence along with SP’s report to RCS and asked him to take disciplinary action against the officer concerned for his involvement in sanction and disbursement of irregular cash credit loan of Rs. 10 lakh by showing undue favour to Shri Debashis Patnaik and Debadutta Patnaik, partners in Bhubaneswar Commercial Corporation without valid documentation and on the basis of fabricated records violating financing norms of OSCB. The cases were still active and yet to come to logical conclusion. Incidentally as per Keonjhar CCB, AGCS( Auditor General of Cooperative Societies) special audit report and RCS ( letter dated 31 January 2019), Rs. 83,54,973 was audit recoverable against Sri Panda pertaining to his period as CEO of Keonjhar DCCB ( District Central Cooperative Bank). The case is still pending even two decades after the cause of action. As per circular of the Government in Cooperation Department ( No. 4868 dated 30 June 2015) , the action should have been taken by fixing responsibility on the MC ( Management Committee)/MIC ( Management In-Charge)/ CEO ( Chief Executive Officer).
NABARD has recommended that in view of magnitude of issues raised and extent of evidence required to be examined , a special investigation by an officer or a team from the cooperative regulator , such as RCS needs to be taken up. OSCB may make a special request to RCS for constituting an enquiry for examining the allegations along with available facts , identify act of omissions and commissions , fix responsibility for lapses and take further necessary action as may be deemed appropriate.
2.2. Huge Illegal payments made to Bishnupada Sethy, MIC from OSCB
Sri Bishnupada Sethy, IAS Commissioner-cum-Secretary, Cooperation Department held the additional charge of OSCB as its Management-in-Charge ( MIC) with effect from 5th February, 2013. As per statutory provision, in case of dissolution of management body of OSCB, the Registrar of Cooperative Societies ( RCS), Govt. of Odisha will be in charge of the Bank. But why and who took the decision to appoint Sri Bishnupada Sethy as MIC replacing Registrar of Cooperative Societies needs to be enquired . There were no policy or guidelines approved by RCS by which MIC would be eligible for various benefits. However, it was observed that the Bank had reimbursed / paid book ( amounting to Rs. 10,000 per annum) , Electricity/ Energy Bill on actual basis , orderly allowances ( at Rs. 3000 per month), and above all Incentive ( staff Rule No. 54-A) payable to employees who are otherwise not eligible for Bonus not exceeding 45 days salary. Incentive paid stood at Rs. 1,70, 691 for 2013-14, Rs. 1,91,519 for 2014-15 and Rs. 65, 993 for 2015-16. Sri Sethy not being staff member of the Bank as per staff service Rules should not have been paid the amount and all payments constitute illegal. NABARD has recommended to OSCB to review the payments.
During his tenure as MIC, he had got reimbursed medical bills in three phases amounting to Rs. 9,46,071 towards hospitalization of wife and father. There were recommendations from Government for reimbursement in two phases on budget constraints with the Department concerned and in one case there was no recommendation from Government. NABARD has recommended to OSCB and RCS to determine the entitlements of MIC , President and Directors of the Board of the Bank to make the institution run on the basis of rules , not discretion.
2.3. Fit and Proper Criteria – Odisha Assembly was misled
To a starred Assembly question No. 1310, by Shri Debashis Nayak, MLA , it was replied by RCS vide letter No. 4892/ Bank -1 dated 24 March 2017 ( based on feedback from OSCB) that OSCB had posted its officers as CEOs to all 17 DCCBs who were complying all fit and proper criteria prescribed by RBI vide its letter dated 3 March 2009. But the fact is that of 17 names only 7 were DGMs of OSCB and none of them had completed 8 years in that grade , at the time of posting as CEO, as per information made available by OSCB, to be eligible for being posted as CEOs of RCBs. As per Staff Service Rules Rule No. 5, DGM is the starting grade of Middle Management and Manager ( Officer Grade-III) and AGM ( Officer Grade –II) being first two officer grades were to be excluded as per the guidelines. Assistant Manager ( Grade-IV ) being a sub-Officer /non-officer post as per Staff Services Rules to arrive at the Middle Management grade. The information furnished to the State Legislative Assembly was, therefore false and misleading.
During inspection of NABARD, it was observed that none of the 17 DCCBs complied with the fit and proper criteria issued by RBI.
2.4. Fraud and Forgery in Award of Contract for computerization to VSoft Company
Pursuant to a number of complaints received on computerization relating to CBS ( Core Banking Solution) in OSCB, DCCBs and PACS ( Primary Agriculture Cooperative Societies) , NABARD had conducted inspection about it. It was as follows.
The Tender process started with RFP in September 2010. The technical bids were collected on 14 January 2011. In terms of the Special Committee Proceedings ( 10 February 2011), Technical and Commercial bids were given weightage and approved after deliberations at 80:20 ( 80 % for Technical and 20% for commercial), which was considered to be quite robust as against industry standard at 70:30. To ensure quality CBS. It was suggested to refer the decision to consultants. A CBS software ( Core Banking Solution Software) demo was organized on 8 July 2011 with participation from 14 selected officials of the Bank. VSoft company along with two others had failed to demonstrate as per tender documents and there were very serious shortcomings raising queries / questions on their CBS modules. Only TCS and Polaris demonstrated satisfactorily as per specifications in their tender documents. Without express reasons, the views of the committee was overlooked and VSoft , on the other hand , were handed the committee’s’ shortcomings chart in respect of the company for improvement instead of the bank rejecting the tender outright on technical grounds as per Bid evaluation Criteria( at B6 of RFP). Meanwhile , the commercial bids were opened on 30 August 2011. The Evaluation of weighted techno-commercial score was changed from 80:20 to 30:70 ( 30% Technical, 70% Commercial) resulting in VSoft becoming L1. There was no pre-announcement of the revised techno-commercial matrix. The drastic modification giving primacy to price and relegating the technical to secondary status in evaluation parameters had no basis and the consultants’ detailed opinion / views on the subject were out of the record except a cursory statement in the proceedings of the special committee dated 30. August 2011. As per technical evaluation conducted by Technical Committee on 21.7.2011, VSoft, Polaris and TCS were awarded 146, 150 and 175 out of 200 points respectively. On the aspect of technical presentation marks awarded were 15,16 and 18 respectively, though as per the presentation minutes while TCS and Polaris came out satisfactorily , VSoft failed to convince the committee as the software was not as per the tender documents. However, for completeness of overall solution marks awarded were 33, 37 and 42 respectively in the matrix. There was apparently inconsistency between the Committee’s assessment and the proceedings of the 8th July 2011 demo. At 14-member CBS Committee which treated the software of TCS and Polaris as “ satisfactory”. There was no convincing effort in the Technical Committee proceedings to justify the counter view. The marks awarded to VSoft is , therefore a kind of window dressing.
A group of 10 members of the Management Committee (MC) had submitted dissenting note with respect to MC RESOLUTION ON MEETING DATED 25.1.2012 bringing to fore a series of issues on CBS implementation. But the bank had never examined or considered for redressal of their complaints , although the issues pointed out in their dissenting note were quite serious. Even TCS and Polaris had also complained vide letters dated 13 September 2011 and 30 November 2011 respectively against irregularities in award of contract. Allegations were serious but no action had been taken on the complaints in question.
Questionable Advance Payments to VSoft Company– The VSoft was provided advances of money amounting to Rs. 1,00,00,000 on 2 July 2014 and Rs. 19,85,000 for VSAT and Rs. 13,44,000 to Trend Micro on unknown dates ( during 2013-14 ) as per the records of payment available with DIT. The advances had no other details and no one in the bank had any knowledge as to their final settlement. On different dates between the period 7 April 2018 to August 2018, the bank had paid advances of Rs. 8,69,43,913 to VSoft as advance over and above CBS contract amount and outside the agreement. The details of payments and purpose is not available with the vouchures and DIT is also not aware of the most of the purpose of payments.
2.5. PACS Computerisation- Another Mega Scam
In November 2012, State Government decided for installation of desktop computer system in around 2700 PACS ( Primary Agriculture Cooperative Society) engaged in paddy procurement and an instruction was issued to the respective DCCBs ( District Central Cooperative Banks) to purchase and supply desktop computers for them. All of a sudden, on 20 December 2012, OSCB reversed its decision and advised DCCBs to keep in abeyance the earlier order as OSCB had decided to make direct purchase of desktops and supply them to PACS . During March 2013 , OSCB made a mega purchase of desktops and printers for all PACS and recorded the cost from the latter, by debiting the current account , without consultation or consent , citing a resolution of a meeting not having any relevance to direct purchase by OSCB , without assessing availability of necessary infrastructure like proper house, electricity, availability of computer operators etc. at PACS. Many of these computers and printers were lying idle even for years in the PACS in delivery cartoons after supply heading to obsolescence. PACS also faced problem of installation, operation and warranty.
The State Government had extended the services of Shri T.K.Panda as MD , pursuant to a letter dated 28 May 2014 from OSCB’s CBS consultant ( based on a flimsy appeal from OSCB Employee’s union to the Consultant) recommending to the MIC ( Management-in-Charge) for retaining the service of current MD for an appropriate period so that the projects may be completed. Thus, Shri Panda’s continuance was required for successful implementation of PACS computerization programme. For this the State had provided financial assistance of Rs. 48.77 crores to OSCB. The PACS computerization had hit a dead end by March 2018. Most of the PACS, where data migration had occurred and the societies reportedly gone online , had since reverted to old ledger system due to host of issues like lack of connectivity, software snags, poor and improper migration of data, inadequate data on the system post migration etc. Further, PACS CBS system did not allow day end without closure of daybook keeping daybook open for days and months and indulge in backdated entry in the daybook was a long held cooperative practice. Incidentally, the Government had fixed the deadline for PACS computerization as 31 August 2016. It was surprising that , despite having consultants on bank’s roll , without proper assessment of connectivity issue and technology requirement and necessary preparation of migration, the bank had launched CBS for 2700 PACS. The action on consultant’s recommendation for continuance of Sri T.K.Panda as MD not only yielded no result , but also in retrospect the Consultant’s suggestion to MIC in reaction to the Union’s plea , which appeared like a managed event , was unwarranted and irrelevant to ( technical) consultancy work. No doubt, the consultants had their share of blame for the crippling CBS issues manifesting for several years without solution in OSCB, DCCBs and PACS.
2.6. Mobile Van Banking Services – A testimony of Mindless expenditure
The Bank had introduced Banks on Wheels ( mobile van for banking service) to provide doorstep banking in unbanked areas, by allotment of 20 mobile vans with ATM service etc. to DCCBs under RKVY ( Rashtriya Krushi Vikash Yojana) involving expenditure of more than Rs. 6 crores. It was inaugurated by Chief Minister on 9 September 2015. The service had since been discontinued some three years back due to inadequacies in software, lack of connectivity, and poor management by DCCBs and OSCB. The RCS vide his letter No. 13267 dated 10 August 2017 advised OSCB that the standing committee on its tour had found the mobile banking service vehicle lying unused and idle at Malkangiri and expressed concern. NABARD has recommended to bank to take appropriate action and ensure the purpose for which the vehicles were acquired are put to use and benefit derived by the people at unbanked areas / Gram panchayats.
2.7. RuPay Kishan Credit Card (KCC)- A case of Forgery and Wastage of public money
As per the VSoft’s PACS CBS design, the KCC borrowers holding RuPay KCC were required to open SB account with the respective branches of DCCBs which were technically required to be mapped to the related KCC loan accounts held with the PACS ( Primary Agriculture Cooperative Society). As and when the KCC borrower pushed EMV chip enabled RuPay card into an ATM or POS connected to OSCB-DCCB-PACS database and entered the amount of proposal loan , it debited the like amount to the KCC loan account in the Kishan loan module of the PACS CBS system and transferred the amount to the SB account held with DCCB branch and simultaneously , deducted the amount from the SB account and dispensed the cash. This, however, did not happen seamlessly due to inadequacy and inconsistency of data due to faulty data migration, acute absence of connectivity and multiple software glitches. Thus, RuPay KSS had not been a success possible CBS of branch account in respective DCCBs.
It was observed from allegation of Sri Mahendra Kumar Nayak, Director on the Board that in the Board meetings dated 06 January 2017 and 31 March 2017 , reasonable objections were raised against placing orders with the Madras security Printers for printing EMV Chip based RuPay ATM Cards. It was decied to call for open tenders with publication of the tender requirements in an English daily and to place order for printing of cards to the lowest bidders. But later the resolution had been recorded in an altogether different way as per the proposal in the agenda and to call for Letter of Intent( LoI) from the approved printers of NPCI for the purpose of price discovery. It was added that if the Madras Security Printers failed to deliver the cards as per schedule, the agreement would be cancelled and fresh quotations would be invited from the printers for printing of cards. Neither members of the Board were informed about the previous agreement/ arrangements , if any nor about the value of above orders for printing of ATM cards. It was learnt that Managing Director on his own had placed orders with the Madras Security Printers and only for the purpose of price discovery an LoI was invited from approved printers of NPCI and Managing Director had made the resolution of his own accord.
2.8. Customer Grievance & RTI – A Dead Horse
The Bank had not put in place a suitable policy for improving customer services in the Bank/s branches with the approval of the Board and ensuring its implementation as advised by NABARD vide circular no. NB DOS.POL.1004/J. 1/2007-08 dated 12 July 2007.
The Barnchs did not have a system of recording the customer’s grievances. In case any complaint was received by the branch, it was marked to an officer to redress the grievances. However no follow up action was taken thereafter.
Branches have not yet displayed the name of Public Information Officer under the RTI Act as well as the abridged version of bank’s latest balance sheet in the branches for information of customers as per extant instructions of appropriate authorities. It was observed by Inspection team that there were 10 appeals on RTI Applications pending with the 1st Appellate Authority as on the date of conduct of inspection of which 6 were pending for more than 5 months and the remaining for about 2 months. The reason for pending appeals were not on record and unknown.
2.9. Excess/ Irregular Claim of Interest Subvention from Govt. of India and Govt. of Odisha
During course of inspection by NABARD, the claims made by the Bank under the GOI scheme for interest subvention and GOO scheme for cost-cum-Interest Subvention on crop loans were examined. On scrutiny of interest subvention claims made by the bank on behalf of STCCS it was observed by NABARD that the bank had made an excess claim and received subvention of Rs. 5661.77 lakh. NABARD has recommended for refund of the said for the year 2016-17 of which the shares of OSCB and DCCBs were Rs. 2105.19 lakh and Rs. 3556.58 lakh respectively. The Bank had lodged its Cost-cum-Interest Subvention claims with Govt. of Odisha and had received excess interest subvention of Rs. 11296.26 lakh from GOO for 2016-17. NABARD recommended that OSCB, DCCB and PACS are required to refund Rs. 10478.17 lakh, Rs. 1891.70 lakh and (-) Rs. 1073.61 lakh respectively. The excess and irregular claim resulted from to the fact that the bank has added , contrary to provisions, additional ST-SAO ( short term Agriculture operation crop loan) borrowing product ( borrowings obtained from NABARD) and DCCB borrowing product ( borrowings obtained from OSCB by DCCBs) to the actual Ground Level crop loan product.
Summary of Excess Interest Subvention Claim released to OSCB
For the period from 2012-13 to 2016-17
Govt. of India Interest Subvention
Rs. In lakhs
| Year | Excess interest subvention released to OSCB ( Odsiha State Cooperative Bank) | Excess interest subvention released to DCCBs ( District Central Cooperative Bank) |
| 2012-13 | 815.27 | 713.64 |
| 2013-14 | 923.21 | 2125.64 |
| 2014-15 | 1159.49 | 2357.83 |
| 2015-16 | 1587.47 | 2684.63 |
| 2016-17 | 2105.19 | 3556.58 |
| Total | 6590.63 | 11438.32 |
Grand Total 18028.95
Govt. of Odisha Interest subvention
In Lakhs
| Year | Excess claim released to OSCB | Excess claim released to DCCBs | Excess claim released to PACS ( Primary Agriculture Cooperative Society) |
| 2012-13 | 5283.93 | 1609.27 | -662.35 |
| 2013-14 | 6572.17 | 1804.82 | 0 |
| 2014-15 | 7218.95 | 2459.85 | 5.46 |
| 2015-16 | 5736.04 | 3927.84 | -605.6 |
| 2016-17 | 10478.17 | 1891.7 | -1073.61 |
| Total | 35289.26 | 11693.48 | -2336.10 |
Grand Total 44646.64
2.10. Visit Sponsored by HDFC Life:
OSCB made a request to the Registrar vide letter dated 23 October 2018 to accord permission in favour of President to undertake a fully paid foreign visit sponsored by HDFC Life during November 2018. This was forwarded by RCS to Government in Cooperation Department for consideration. However, without prior permission the visit was conducted which as per existing norms required Government clearance. Incidentally, HDFC Life was the company that managed the Leave Encashment Fund of OSCB. In the interest of developing ethics and integrity of the highest order in the institution’s operations and decision making, the bank may desist from accepting freebies or similar offers from its service providers or partner agencies. OSCB may also take up with RCS to develop code of conduct in this regard for official and non-official functionaries.
5. Disqualification of Director for Commercial Interest
The RCS vide letter No.3692 dated 14 February 2019 had advised OSCB that Orissa Express group of newspapers was awarded advertisement costing 37.18 lakh for publication of orders of arbitrators in Dispute Cases during the period from 2008 to 2017. It was established through enquiry that the then MD, OSCB had shown “highest inclination” (sic) to the newspaper, Odisha Express, wherein one, Shri Ambika Prasad Das, Director on the MC of the bank, was the Executive Director. As such, transactions attracted disqualification as Director of the bank under Sections 28(3) and 28(3)(f) read with z8(3-aa) of OCS Act, 1962 and the Byelaw No. 26 (6-a) of the bank. OSCB vide letter No.8115 dated 25 February 2019 had advised Shri Das that he had incurred disqualification and, accordingly, dismissed him from the Board. However, shortly thereafter, the Government in Cooperation Department vide letter No.1350 dated 22 February 2019 had directed OSCB “not to take any action on report of RCS until further orders.” Meanwhile, during inspection it was brought to notice that the Odisha Express, where Shri Das is an Executive Director, was awarded by OSCB ads directly or through an ad agency more than 10 lakh between FY 2013-14 to 2017-18. As commercial interest of the Director with OSCB was beyond doubt, action as per the provisions of the law must follow without delay. OSCB may take up with the Government and RCS for prompt action.
Pradip Pradhan
RTI Activist & State Convener, Odisha Soochana adhikar Abhijan
M-9937843482
Date – 29.6.19
( NB- This is revised one of earlier posting on 28.6.19 which was presented in the press meet)
