BJP questions civic body’s low-return investments

Says bulk of BMC’s FDs are in banks that offer low rates

Mumbai: The BMC has invested thousands of crores from its surplus revenue in fixed deposits, but most of these are in banks that offer low interest rates, while nominal sums have been invested in banks that offer higher interest rates.

Abhijeet Samant, a member of the Standing Committee and vice-president of the Mumbai Bharatiya Janata Party (BJP), found these anomalies in a random check of investments brought before the BMC’s Financial Committee for approval last week.

“The BMC has invested ₹2,666 crore between June 1 and 27. Of these, 18 investments worth over ₹1,159 crore were in the form of fixed deposits at four banks: Oriental Bank of Commerce, Vijaya Bank, Punjab and Sind Bank and Indian Bank at interest rates of less than 6%,” Mr. Samant said.

He asked why some banks were so openly favoured for investment even though they offered low returns. “ Low returns mean low earnings or even loss-making investments. These investments were made from surplus revenue in water, storm water drain and other departments and from various budgetary sanctions,” he said.

Same-day disparity

Mr. Samant said that while variable rate of interest on different days are understandable, there was wide disparity in interest rates on investments made on the same day. “For instance, on June 1, about ₹24 crore were invested in Indian Bank at as low as 5.75 %. On the same day, small sums like ₹1 crore were invested in banks like State Bank of India or Punjab National Bank even though they offered higher returns like 6.9%,” he said.

Similarly, on June 26, a whopping ₹169 crore were invested at just 5.83% in Vijaya Bank, but a nominal ₹1 crore FD was made in banks like SBI, that offered up to about 6.9%. “These investments were made across the board in many banks, but some banks managed to get higher investments for no logical reason,” Mr. Samant said.

‘Old ways’

The BMC’s investments in FDs now stand at ₹6,44,482.64 crore. It expects to earn an estimated ₹198.71 crore from its investments of ₹2,666.99 crore made in June this year.

BJP corporator Makarand Narvekar said, “Why is the BMC stuck with the old ways of investments, keeping money only in FDs? There are so many financial instruments available in the market, like mutual funds or bonds. Our corpus gets reduced every year due to inflation. The BMC should hire financial advisers to invest better.”

Additional Municipal Commissioner Sanjay Mukherjee said that whenever investments were to be made, the BMC asks banks to come up with the best offers. “We are allowed to invest in Central government securities, and are now looking into it,” Dr. Mukherjee said.