Mumbai: A controversy is brewing in Bharat Co-Operative Bank (BCB) with regard to alleged bogus loans to spice and dry fruit traders based on “nonexisting” stocks shown in third party warehouses at Navi Mumbai’s APMC (Agriculture Produce Market Committee) premises.

The infamous NSEL scam of 2013 also involved bogus stocks in warehouses and fictitious book entries, based on which money was borrowed. When the scam was revealed, adequate stock could not be found in warehouses and borrowers could not return money. The BCB recently classified M/s Smart Distributors and M/s Nileshkumar Vinodchandra & Co (NVC) as non-performing assets (NPAs), after they failed to return the money as per the loan terms. Two emails from the FPJ to the companies were not replied to.

A whistleblower, who blew the lid off the scam, informed BCB that Smart Distributors and NVC were involved in availing ‘cash credit facility’ from BCB showing ‘bogus stocks’ in various APMC godowns and ‘fictitious book entries’. BCB is now investigating the allegations, which state that money taken from the bank by the traders via cash credit facility was rotating among their family members via circular book entries.

Whistleblower Urges BCB To Verify Tax Payments & Clear Liabilities Of NPA Borrowers

The whistleblower further stated that the bank should have checked if the traders had paid taxes on the commodities bought and sold, to verify if the book entries were genuine. “You are requested to provide your comments for the said letter (whistleblower letter) and also clear the entire liabilities of both the cash and credit accounts at the earliest,” said a notice from BCB official Asha P Kotiyan to the borrowers, after classifying Smart Distributors and NVC as NPAs.

“The stock statement provided by NVC to BCB up to August 31 this year shows Nilesh Distributors (at sr. no. 4) as its sundry debtor with money receivable for more than 120 days. NVC has four partners – Vinodchandra Gandhi, Suryakant Gandhi, Chandrakant Gandhi and Haresh Gandhi. Vinodchandra Gandhi is father of Nilesh Gandhi and other three are real uncles of Nilesh Gandhi, borrowing from BCB and lending to son’s Nilesh Distributors,” the whistleblower’s letter has alleged.

“Out of the 20 sundry debtors shown in the statement, you may see 13 entries of the same family entities with cross holdings. In the sundry creditors segment, Nilesh Distributors, Sachin Distributors, Smart Distributors and Gandhi Dry Fruits (another family firm) are shown as creditors, to all of whom amounts are payable for more than 120 days (nobody knows exact days and it could be several months). Sachin Gandhi and Manish Gandhi (son of Chandrakant Gandhi) are partners in Smart Distributors,” the whistleblower has said.

As per the whistleblower’s letter, the leading directors, partners and promoters of Smart Distributors and NVC allegedly diverted the funds borrowed from the bank to their son’s company and other related entities with cross holdings or similar partners as the borrowers. The borrowers from BCB and most sundry debtors and creditors of the two companies, all stayed under one roof.

About The Letter To The Reserve Bank Of India

The letter to the Reserve Bank of India states, “Bharat Co-operative Bank has lent to father and uncle’s company, who in turn have lent to sons and the same are also sundry creditors to fathers and uncles. The oxygen for all is money from BCB and money is moving via circular book entries. BCB failed to check the business details and GST for the mandatory KYC of loans.”

BCB did not respond in detail to FPJ emails on the matter. “We will review your request and will revert back to you soon,” was the terse response on email by the BCB nodal officer. Interestingly, Mumbai police has initiated an investigation into the alleged scam and the role of bank officials too is under the scanner. But police officials were tight lipped on further details as they said investigations are underway.