Rs. 7.94 crore was extended to Sky Light Hospitality
Finance Minister P. Chidambaram may have described the controversial business dealings of Sonia Gandhi’s son-in-law as transactions involving “private individuals” but the disclosure that the public sector Corporation Bank had extended an overdraft of Rs 7.94 crore in 2007-2008 to Robert Vadra’s Sky Light Hospitality when his company had total resources of only one lakh rupees has left officials at the Mangalore-based lender scrambling to understand the circumstances in which the transaction took place and whether it conformed to normal lending guidelines.
Asked what amount Corporation Bank would normally extend as overdraft to a borrower with a company whose issued capital was Rs.1 lakh, Ajai Kumar, Chairman and Managing Director, Corporation Bank, told The Hindu, “It is not a question I can answer until I get the full facts. You should understand. You have to take the full picture.” He cited client confidentiality for not sharing the information, even if he were to get it, on Mr. Vadra's business with the bank. However, he added that he could get the full facts from the branch in Delhi “may be by tomorrow” [Thursday].
Details of the overdraft were reported in Business Standard on Wednesday, which noted that the money—which was used towards the first instalment on a Rs 15.38 crore parcel of land in Manesar, Haryana—was returned to the bank by Mr. Vadra a year later. The land itself was sold by Mr. Vadra to DLF for Rs 58 crore.
It is not clear from Sky Light’s balance sheets what collateral, if any, was put up for the overdraft.
B.K. Divakara, General Manager (Credit), Corporation Bank, told The Hindu: “As of date, we have no liability from that person. It [the overdraft given by the Bank] was two to three years ago. No one is aware who was there that time (sic). We have to take up the details.”
About norms followed by the Bank for extending overdrafts, he said: “There is no such fixed upper limit. It depends on the merits of each case. It cannot be generalised.”
A highly-placed source within the bank told The Hindu that Corporation Bank extends overdrafts to customers based on their “business projects, net worth and past record.” Commenting on the size of the overdraft, one official said that in this particular case, “on the face of it, he [Vadra] can’t be given [an overdraft of that amount]. If [he] has, they [the Bank officials] have to see why he has been given [it].” “Unless he is very regular and well meaning, it is a risk,” he added.
A general manager of another public sector bank said that he could not give a “yes” or “no” reply to whether this specific overdraft could be justified. However, he noted that given the capital of the company, the overdraft amount “definitely” appeared disproportionate.
In August 2011, the Central Vigilance Commission (CVC) had issued a memo to the Department of Financial Services of Corporation Bank seeking an explanation from its former CMD, Ramnath Pradeep, on “noticed lapses” in giving unsecured loans. The CVC, in the memo, had directed the DFS to take “immediate action” to stop the CMD from continuing “the abuse of authority”.
Top executives of the Bank at that time took out a signature campaign to gather support for a memorandum appealing to former Finance Minister Pranab Mukherjee to “save” the bank.
The CMD when Mr. Vadra got his overdraft was not Mr. Pradeep but B. Sambamurthy, currently director of the Institute for Development and Research in Banking Technology, Hyderabad. Mr. Sambamurthy told The Hindu he had no recollection of the overdraft.