Systemic deficiencies breed bad loans at SBS

83% of the Cash Credit/ Overdraft loan accounts at State Bank of Sikkim are Non-Performing Assets!

The banker to the Government of Sikkim appears to be in urgent need for some banking lessons given its penchant for accumulating non-performing assets against cash credit and overdraft loan accounts. State Bank of Sikkim, established as the banker to the GoS by a royal proclamation in June 1968, was studied by auditors from the office of the Accountant General [Audit] as they tried to find out the reasons for accumulation of NPA’s against CC and OD loan facilities. Their findings are included in the Report of the Comptroller and Auditor General of India on Social, Economic, Revenue and General Sectors for the year ended March 2014. The report was tabled by the Chief Minister during the Legislative Assembly’s last sitting in end-March. It appears that the bank has been getting banking basics wrong by advancing cash credit and overdraft facilities without obtaining adequate collateral security or undertaking verification and evaluation of mortgaged properties or bothering with monitoring recovery of dues.

State’s Bank struggles with bad loans and poor accounting

STATE BANK OF SIKKIM STARES AT FAILING FISCAL HEALTH - VISHNU NEOPANEY
The State Bank of Sikkim is under a fresh cloud of suspicion of misappropriation at some of its branches, and even as these allegations are being investigated, there is further bad news for the bank in that it has also started running up losses. As they say, when it rains, it pours, and the string of bad news for the bank continues with a realization that a majority of its cash credit loans have become non-performing assets, as have an unreasonably high number of construction loans. Unfortunately, the slipping fortunes do not appear to have triggered any major worry at the bank where it continues to be business as usual with the statement of accounts not having been reconciled for the past three years and the Board of Directors not having met for the past year.
Readers will recall that the last big scandal at SBS was the Sombarai Bank embezzlement suspected to have cheated the State exchequer of around Rs. 2.56 crores. That was back in the year 2001. In the latest instance, the Bank has reportedly been informed of suspected embezzlement of around Rs. 42 lakhs at four of its branches.
The SBS Managing Director, Hem Karki, when contacted, confirmed that such a report has reached his table and that the bank was re-verifying the facts to check whether there has really been misappropriation or misuse of money or not. He stressed that as things stand, the suspicions were speculative and that the Bank is convinced that there has been no misappropriation.
The SBS was established as the state treasury bank on 19 September 1968 by a proclamation of the Chogyal and continues to function as the lead bank for all State Government transactions. It is vested with the responsibility to receive money on behalf of the Government and make all government payments and keeping custody of the balances of the Government in current account as well as fixed deposits.
The Bank currently has 35 branches across the State. Despite these times of instant connectivity and online transactions, SBS has no facilities for even realtime connection between the branches and the headquarters. Needless to add, this leads to poor accounting and conflicting records. Take for instance the record on cash balance of the government at SBS as on 31 March 2013. As per the bank, it had Rs. 65.36 crore of govt money in cash balance while the Finance Accounts 2012-13, there was a balance of Rs. 19.50 crore, leaving an un-reconciled balance of Rs. 45.86 crore!
Needless to add, given such a scenario, Rs. 42 lakhs in unexplained expenses suspected to be embezzlement is hardly shocking.
What is a bigger worry though is that Bank, which was posting profits till 2009-10, reported losses for 2010-11. Its balance sheet for later years have not been reconciled yet and only once that is done will it become clear whether 2010-11 was an aberration or the start of a new trend.
As per data available with NOW!, the State Bank of Sikkim posted a loss of Rs. 705 lakhs in 2010-11; this, within a year of having posted a Rs. 567.46 lakh profit in 2009-10.
The Bank’s failing fiscal health is expectedly a result of increasing operational costs and falling revenue, but it would have easily tided over this situation if it had displayed more financial prudence and not allowed a staggering 82% of its cash credit loans to become non-performing assets.
Where the bank’s operational costs increased from around Rs. 7,875 lakhs in 2009-10 to Rs. 8,798 lakh in 2010-11, its revenue fell from Rs. 8,442 lakh in 2009-10 to Rs. 8,093 lakh the next year.
As mentioned, this would have been an inconsequential blip in the balance sheet if the bank’s debtors had not defaulted so astronomically. It is learnt that out of the 460 cash credit loanees [as of 31 March 2013], 380 have become non-performing assets collectively posting an inexcusable Rs. 188 crore in bad loans.
And then there are the 1,385 construction loans given out by the bank. Of these, 352 have become non-performing assets accounting for around Rs. 116 crore in bad loans.
The suspected misappropriation of around Rs. 43 lakhs currently being looked into by the bank pales in comparison.
The bank has not ascertained the annual loss from provisional accounts for the financial year 2011-12 and 2012-13 as of now. In the last session of the Legislative Assembly, SBS had tabled financial report for the financial years 2006 to 2008-09.
Cash credits, loans frequently taken out by contractors and business houses against work orders [in anticipation of business and not against any mortgage as such], are clearly a major concern, having consumed Rs. 188 crore in bad loans.
And before one jumps at SBS with more allegations to add to its already overflowing bag of woes, a short digression on how loans and finances are managed by the State Government might prove an enlightening experience. As per the CAG Report of 2013, departments [like Animal Husbandry, Agriculture and Forest] which disbursed loans to “beneficiaries” and the Finance Department [which maintains accounts of the Government], “do not even have information relating to details of the loanees, actual dates of loans, terms and conditions of the loans, schedule of recovery, rate of interest, penal interest for default in repayment, fulfillment of objectives for which the loans were given, etc.”
SBS is only continuing this casual approach, and while this cannot excuse what is happening at the treasury, it at least explains it.
Meanwhile, in response to queries from NOW! on why the annual summary report of the Bank has not been taken up for the last three years and what was happening with the alleged misappropriation, State Bank of Sikkim Board Member, Secretary MG Kiran, who is also Principal Secretary, Finance, Revenue and Expenditure Department, explained that the Board meeting could not be held in time due to enforcement of Model Code of Conduct earlier in the year and then the government formation process after which a new Chairperson of the Bank was appointed. This meeting, he adds, will now be conveyed shortly.
He also reassured that if any substance is found in the allegations of misappropriation, it will be taken up at the meeting.
When asked about the loss and non-recovery of loans, the SBS MD said that issuing of a series or notices and even publication of Notices in newspapers has had a good impact and a large number of loanees have come forward to settle their dues.
Mr. Karki further said that the Bank is trying its best to introduce Core-banking system at SBS as well and will have the system in place by next year, and that after obtaining the approval of Board of Directors, the Bank will float open bidding for supply software containing RFP [Request for Financial Performance]. Banking processes will be better managed then and proper and timely reconciliation of accounts will also flag worries and concerns before they become debilitating as the situation appears to have become now.

Panchayat nomination filing process gets unpleasant hiccup with SBS half-yearly closing

ELECTION COMMISSION INTERVENES, BANK OPENS FOR BUSINESS

GANGTOK, 01 Oct: With aspiring candidates of the Panchayat polls already miffed at the short notice provided by the administration in filing their nominations, especially given the number of holidays the past week had, the closure of the State Bank of Sikkim today only aggravated their situation.
With the bank observing its half-yearly closing day today, many of the candidates who wanted to file their nominations today, the last day for doing so, were almost prevented from doing so as they were unable to get their TDRs from the State Bank of Sikkim. It was only after the State Election Commission intervened and spoke to the Managing Director, SBS, that the bank opened fits branches for the panchayat candidates who could then file their nominations.
As per reports, there was a big crowd outside the Sichey branch of the SBS here this morning. They had arrived to get their TDRs made in order to file their nominations for the panchayat elections. What they found was a bank closed for the day in observance of the half-yearly closing day.
The half-yearly closing day for banks falls on 29 Sept, but since that day was a holiday in Sikkim, SBS decided to observe it on 01 Oct instead [30 Sept was a Sunday]. Interestingly, banks normally take the half-yearly closing on the preceding day when the appointed day is a holiday. As per his norm, SBS should have been closed on 28 Sept, which also would have been inconvenient for panchayat aspirants. Taking this closing day today, allowed the bank a string of four straight days of holidays [with 02 Oct being Gandhi Jayanti, a national holiday].
If the bank and its branches had remained closed today, it would have definitely complicated matters, but things did not come to such a pass with the intervention of the State Election Commissioner following which the SBS opened its counters to accommodate the candidates.

Dikchu residents demand establishment of SBS branch at Dikchu Bazaar

MANGAN, 26 July:  The people of Dikchu including Lower Dzongu, Thingchim Mangshila and other villages have demanded the establishment of a State Bank of Sikkim branch at Dikchu. The public of these villages have to go to Gangtok or Mangan to make a Bank Receipt, spending a whole day for a single BR.
Dikchu’s location makes it accessible to the public of several villages including three constituencies and since it lies between the North and East districts of the state it will be convenient for the villagers living in the periphery of Dikchu.
The public of the area request the authorities to establish a State Bank of Sikkim branch here for the holistic development of the people.

Suspected scamster fishes in Uttarakhand using SBS as bait

SILIGURI BUSINESSMAN FAKES SBS BANK GUARANTEE TO BID FOR CONTRACT IN UTTARAKHAND

VISHNU NEOPANEY
GANGTOK, 10 July: The Criminal Investigation Department of Sikkim Police has registered a case of forgery, cheating and fabrication of documents against M/s Shree Balajee Water & Power Engineer’s PVT Ltd, a company registered in Srinagar in the Pauri Garhwal district of Uttarakhand by a businessman from Siliguri. The case was registered late last evening following a complaint filed by the General Manager of State Bank of Sikkim. The company, bidding for a contract work in Uttarakhand, had allegedly forged documents to make it appear that it had the backing of SBS.
The company was seeking contract work from Uttarakhand Peyjel Nigam [Drinking Water Corporation] for construction of a Sewerage Treatment Plant there.
The Managing Director of Shree Balajee Water and Power Engineer’s Pvt Ltd had allegedly forged the State Bank of Sikkim’s letter-pad, seal and signature of the General Manager and submitted it to Uttarakhand Peyjel Nigam claiming that the SBS was sitting guarantor for the company to the tune of Rs.3.61crore.
The letter claimed that SBS was ready to release Rs.36 lakh as initial investment for the said contract work. The MD of the said company, as mentioned, is believed to hail from Siliguri, West Bengal.
The office of the Project Manager, Construction and Maintenance Unit [Ganga], Uttarakhand Peyjel Nigam, Srinagar [Pauri Garhwal], on 26 June wrote to the General Manager, State Bank of Sikkim for cross verification and factual position of the firm, details of its bank statement [submitted by it] and its arrangement with SBS.
Upon receiving the letter from Uttarakhand Peyjel Nigam along with the copy of the said Bank Guarantor letter, SBS clarified that the letter and account details presented in the name of the firm and the signature in the Bank Guarantor’s letter were forged.
The State Bank of Sikkim upon cross verification of the account, the accused MD has a personal savings account in SBS, discovered that it had a balance of Rs.4,000 and had been opened recently. It was obvious by then that a scam was being attempted with an attempt to even implicate SBS.
In an FIR lodged by General Manager-I of State Bank of Sikkim, Gangtok, it is stated that the Bank has not issued any such Guarantor Letter in favour of M/s Shree Balajee Water and Power Engineer’s Pvt Ltd adding that the signature on the documents, seals and letter pad are also forged and fabricated.
On the basis of the FIR, the CID has registered a case under section 471/468/420/120 ‘B’ of the Indian Penal Code [using as genuine a forged document, forgery for the purpose of cheating, cheating and dishonestly inducing delivery of property and punishment of criminal conspiracy] and the case is under investigation.

SBS opens its 29th branch at Kanchenjunga Shopping Complex

GANGTOK, 24 Feb: State Bank of Sikkim’s 29th branch in the state was inaugurated by the Human Resource Development Minister, NK Pradhan at the Kanchenjunga Shopping complex today. In his address, the HRD Minister stressed that SBS has a huge role to play in the overall development of the state and the bank is a partner in the development of the state.
He urged the businessmen of Kanchenjunga Shopping complex to support the branch by opening their accounts in the bank. He further urged the bank to help out small businessmen by providing loans with proper verification.
SBS Chairman, LM Lepcha informed that the bank was established by the Chogyal in 1968 and later was taken up by the State government in 1983. He informed that the bank now has a total of 29 branches across the state including the head office and 26 of its branches are fully computerized.
Earlier in his welcome address, SBS Managing Director, Vishal Chauhan said that SBS has witnessed an increase in the number of branches and customers in the last two years. He informed that the bank has opened its branches at Kabi BAC, Sang and Parakha and now this new branch at Kanchenjunga Shopping complex. He further informed that the bank is still working hard to increase the number of branches and customers.
The inaugural function concluded with the vote of thanks by SBS Chief General Manager, Karma Gyatso Bhutia.

Recently appointed Jr. Accounts Assistants ‘purely on temporary basis’ clarifies SBS

GANGTOK, 03 Nov: State Bank of Sikkim has clarified that five persons appointed as Jr. Accounts Assistant, mentioned in news items in local newspapers are purely on a temporary basis to meet the increased workload of the bank owing to the recent earthquake and also due to increased workload in view of the opening of 4 new branches in this financial year, according to a press release issued by the HO, State Bank of Sikkim, Gangtok.

Account holders reveal siphoning of interest dues at SBS Ravangla

GANGTOK, 14 Oct: Following a complaint lodged by account-holders at the State Bank of Sikkim’s Ravangla branch accusing the branch manager there of siphoning away interests accruing to them, the accused official, Tseten Norbu Bhutia, has been placed under suspension pending disciplinary enquiry.

No MLA recommendations required for loans, SBS clarifies

GANGTOK, 08 May: The State Bank of Sikkim, in a press release issued through the IPR Department, has clarified that unlike alleged, the bank was not insisting on MLA recommendations to process loan applications of government employees.
The Sikkim Pradesh Congress Committee, it may be recalled, has issued a strong statement alleging that the bank had introduced such a regime and condemning the bank and the State Government for it.
A rejoinder conveyed by the IPR Department on Saturday, states: “The State Bank of Sikkim has clarified that for the Employees Personal Loan given by the State Bank of Sikkim recommendation of the MLA is not insisted upon and the recommendation is neither pre-requisite nor sufficient condition for Employees Personal Loan from the Bank.”

SPCC condemns SBS condition requiring govt servants to get loan applications recommended by MLAs

GANGTOK, 06 May: The Sikkim Pradesh Congress Committee, in a meeting conveyed today, has strongly condemned what the party sees as the “discriminative policy” of the State Bank of Sikkim in new conditions added by it for the grant of loans to State Government employees.
Under the new policy, the release informs, the loan seeking State Government employees are required to obtain the recommendation of their respective area MLAs on the condition of repayment of the loan amount from their monthly salaries on installment basis.
“Such policy is in direct and blatant violation of the Fundamental Rights of the individuals as guaranteed by the Constitution,” the SPCC release issued by its vice president, Kunga Nima Lepcha, stresses.