As luck would have it, the company (3M India) came out with an urgent request for issue of a guarantee one fine morning when both our Senior Manager and Divisional Manager were on leave. The guarantee was required towards some custom duty payment to be made by the company.
As mentioned by me earlier, the company was not amenable to submit a board resolution and to execute a counter guarantee as per bank rules. In this case we were constrained with one more problem. The draft of the guarantee had some clauses, which deviated from the standard bank guarantee. Such deviations required sanction from the DGM of the Circle Office. I had to rush to the Circle Office, which was located near our office.
Considering the sensitivity of the account, I barged into the chambers of the DGM Mr. Annappa Pai. It was the first time I was entering his cabin for some sanction. I explained the situation to him and told him that the account was sensitive. The DGM could appreciate the urgency. He simply asked me to proceed with the issuing of the guarantee and to send a letter to him to confirm the oral permission given by him. However, he told me that he could not do anything regarding the requirement of resolution and counter guarantee and it was for me to take care.
While coming back from the DGM’s office an idea struck me. I was aware that our bank had attached a copy of the resolution to be passed by the board of the companies to the current account opening forms of the corporates. This draft resolution covered the issue of guarantees by the bank on behalf of the companies also. I went to our main branch and verified the resolution submitted by the company while opening its current account. To my relief, I found that the resolution had specifically covered the guarantees also and the CEO of the company had been authorized to sign the counter guarantees. I took out a copy of the same for our records.
Now it was the question of only obtaining a counter guarantee from the CEO, which I was able to manage. The guarantee was issued to the company promptly and I could heave a sigh of relief. The account continued to be sensitive till the then CMD retired from the bank.
We had three corporate accounts belonging to an ex-service person. All the three units were dealing with computer hardware. While one of the units was in Goa, the other was in Hubli. Both these outstation accounts enjoyed total limits in excess of Rs50 lakh and were classified as large borrowal accounts. The third unit was located in Bangalore. The MD of the company stayed in Bangalore. He controlled the three units from Bangalore as headquarters. As the outstation units enjoyed cash credit facilities, our branches at Hubli and Goa had been entrusted with checking of the stock there. While the outstation unit files were being handled by our large borrowal accounts section at the Circle Office, the Bangalore unit file was handled by the advances section.
The Bangalore unit enjoyed only a small cash credit limit of Rs5 lakh. But our branch had recommended an enhancement of the said limit to Rs30 lakh. This recommendation had been sent to the Circle Office before I had reported at the branch on transfer from Kolkata. I was told that this enhancement was recommended under pressure from somebody at the Head Office. However, just before the sanction was being released, the Reserve Bank of India conducted a special inspection of all the three accounts and sent a special report to Head Office listing out several irregularities.
Among the irregularities pointed out was the discounting of supply bills on partnership firms. In the normal course the supply bill limits are permitted against bills drawn on reputed corporates and government departments only. The RBI had an apprehension that these bills were accommodation bills. As far as the branch was concerned it had obtained specific sanction from the Head Office for discounting such bills.
Meanwhile one of the outstation units had landed in another problem. The Customs Authority had seized an imported consignment received under the letter of credit opened by our branch. They had found out that the actual items imported were different from those mentioned in the letter of credit. The value of the consignment was estimated much higher than the invoiced amount by the customs.
Almost immediately after I joined the branch, we received a letter from the Circle Office that the Head Office had kept the proposal for enhancement in abeyance in view of the serious observations made on the accounts by the RBI. We were also advised to monitor the accounts closely. It was not clear as to why the Head Office had kept the enhancement in abeyance instead of rejecting it outright under the given circumstances.
Over a period of time I came to know that the sanction of the large limits to these companies had something to do with an ex-Chairman of the Bangalore Development Authority. I was told that the Head Office was bent upon sanctioning the enhanced limit to the Bangalore unit sooner or later. There was the apprehension that the branch may be forced to release the enhanced limit under pressure from the Head Office.
While the stock declared by the outstation units was being inspected regularly by our branches in Goa and Hubli, the stock of the Bangalore unit was being inspected by our branch. We had a system under which four of us – the Senior Manager Kudva, me and two other officers were inspecting the stock of all the units strictly by rotation.
I had earlier mentioned that Kudva having worked in the Circle Office (CO) previously as Senior Manager was adept in the art of passing on the accountability. He had started a system of making remarks in every communication received from CO/HO asking his juniors to act upon the instructions, if any. He would mention the specific names of the Manager and the officer. The idea was obviously to make them accountable in case of any future inspections/investigations. He thought that he had performed his duty and was out of the accountability factor. Many a time the instructions used to be impossible to comply with. We had several times expressed our unhappiness to him without much success. In a similar manner he also wanted to shirk from his responsibility of stock inspection. But somehow he was unsuccessful in evading this duty.
As mentioned by me above, the Head Office had kept the sanction of the enhanced limit in abeyance to the Bangalore unit in view of the irregularities observed by the RBI inspectors. But we had heard from different sources that it was only a question of time and the HO was bent upon sending the sanction to the branch at any cost sooner or later. We knew there would be pressure to release the enhanced limit immediately thereafter. It would then naturally be a question of saving our skin for us.
As apprehended by us, the sanction letter was received through the Circle Office one particular day. We were asked to obtain the necessary loan documents for the enhanced limit and make available the same to the company expeditiously. Accordingly we obtained all the loan papers meticulously. The company came back to us a week later with a stock statement showing stocks sufficient to cover the enhanced limits.
It was obviously necessary for us to make a stock inspection before releasing the enhanced limit. By a strange coincidence, it was the turn of our Senior Manager Kudva to inspect the stock. As we had been meticulous in checking the stock strictly by rotation, there was no way he could pass it on to any of us. Besides he was under tremendous pressure from the HO to release the limit at any cost. So the company official came with his vehicle to take him to the unit.
------- (To be continued)