Gurugram: The Haryana government has recommended a Central Bureau of Investigation (CBI) probe into the alleged Rs 590 crore fraud involving two private sector banks.
The banks under the lens are IDFC Bank and AU Small Finance Bank, a senior police officer told ThePrint, adding that the cases involving the Kotak Mahindra Bank were not included in the recommendation sent to the Union Home Ministry.
The funds deposited by various Haryana government agencies, meant to be placed in fixed deposits, were found allegedly diverted by bank officials in collusion with government employees and private individuals for personal financial gain. The funds have since been returned to the state government.
Subsequently, Chief Minister Nayab Singh Saini handed over the probe to the Haryana Anti-Corruption Bureau (ACB), which arrested bank managers, relationship managers, government finance officers, and jewellers allegedly involved in the cash conversion chain. The Enforcement Directorate has also joined the investigation, having conducted raids at 19 locations.
It is learnt that the names of some IAS officers, who were posted in government departments that deposited public funds into the two banks, are now under the scanner.
The wife of an IAS officer, who was posted in IDFC Bank, is suspected of having used her influence to help the bank procure deposits from government departments.
A senior officer told ThePrint that though her role in facilitating deposits from government departments is not being ruled out, she is said to have alerted her superiors when she sensed some irregularities.
The development has set off alarm bells among senior bureaucrats in Haryana, with sources in the know indicating that around half a dozen IAS officers are on the radar of investigating agencies.
The possible entry of the CBI is expected to widen the scope of the probe, with investigators likely to examine the role of senior bureaucrats who, the sources say, may have looked the other way as public funds were systematically diverted.
A warning ignored?
The fraud, the sources suggest, may not be the first time that alarm bells have been rung over the parking of government funds in private banks.
A senior government officer told ThePrint that the finance department had red-flagged the practice as far back as 2012, when it was noticed that several government officers were depositing public funds to a private sector bank.
“There were reports at the time that officers routing government money to Yes Bank, were receiving hefty gifts in return,” the officer said.
The finance department then issued a directive capping the amount of government funds that could be deposited in any private bank at Rs 25 crore.
The HDFC Bank, this officer said, was exempted from this caveat given its size and perceived systemic standing, as it was no longer considered as a private entity for the purpose of these guidelines.
For a while, the officer said, the instructions were followed in letter and spirit. Then the dilution began, quietly, incrementally, and with “remarkable creativity”.
Officials began interpreting the Rs 25 crore ceiling not as a limit on deposits with a bank as a whole, but on individual branches. “A bank with 10 branches, under this convenient reading, could supposedly receive Rs. 250 crore in government funds and remain within the rules. And then, even that fiction was abandoned,” the officer said.
Meanwhile, a senior IAS officer slammed the suggestion that IAS officers bear direct responsibility for monitoring the movement of government funds in banks.
IAS officers are posted as directors in departments, or as managing directors in boards and corporations, the civil servant said, adding that they are not expected to track day-to-day transactions of government money held in banks.
“These matters are handled by departmental officers. It is not the job of a director or an MD to monitor individual bank transactions,” the officer told ThePrint.
(Edited by Tony Rai)