Bank of Baroda under investigation by the SA Reserve Bank
THE SOUTH African Reserve Bank (Sarb) is investigating the Bank of Baroda over money held for companies controlled by the politically connected Gupta family, according to a person familiar with the matter.
The probe, which comes after the central bank fined the Bank of Baroda in June for not doing enough to combat financial crime, was sparked after the Organisation Undoing Tax Abuse (Outa) alleged in court papers that mine-rehabilitation funds held for two of the Gupta family’s companies had been mismanaged and used to repay loans, the person said.
While there is no clear evidence the trust funds were used as collateral or mismanaged, the Bank of Baroda may have breached its own rules about having significant exposure to certain clients, said the person, who asked not to be identified.
Outa said the Bank of Baroda held as much as R1.75 billion on behalf of trusts for the mines, and by law that money must be used for environmental rehabilitation.
Bank of Baroda, which is the only lender in South Africa still offering services to companies linked to the Guptas, is seeking a court order that will allow it to close the accounts.
The Gupta family, who are friends of President Jacob Zuma and in business with one of his sons, have been accused by politicians and civil society groups of using that relationship to influence state contracts and cabinet appointments. Zuma and the family have denied wrongdoing.
The lender’s Johannesburg-based unit was fined R11 million by the central bank in June and issued with a directive to improve its monitoring and reporting of transactions.
Spokespersons for the Bank of Baroda and the Gupta family were not immediately available for comment. The central bank declined to comment.
Outa chief operating officer Ben Theron said on Wednesday that the lobby group had asked its attorneys to enquire if its allegations prompted another investigation into Bank of unusual Baroda, but they had not yet received an answer.
The Guptas had their accounts closed by South Africa’s four biggest banks last year. Bell Pottinger, the Guptas’ London-based public relations firm, collapsed last month after it was found to have stoked racial tensions in South Africa in its work for the family.
After the central bank’s fine, Bank of Baroda told the Guptas and their companies in July that their accounts would be terminated within 11 days and all loans recalled by the end of September.
After talks, the bank agreed to extend the account closures until the end of September. – Bloomberg
A Bank of Baroda advertisement in Mumbai. While there is no clear evidence the bank’s trust funds were used as collateral or mismanaged, Bank of Baroda may have breached its own rules about having significant exposure to certain clients.