A pen kept on a legal contract. (Image: FreeImages.com)

S Raman Quits RBI Committee On Bad Loans And Frauds

S. Raman, a former chairman of Canara Bank and a former whole-time member of SEBI, stepped down from an RBI-appointed committee after his name was included in a chargesheet related to the Winsome Diamonds case.

Raman had been appointed to the committee looking into the reasons behind bad loan divergences reported by banks and the increased incidence of fraud. The committee, set up in February, was headed by YH Malegam, former member of the central board of directors of the Reserve Bank of India.

In an impassioned letter to the committee, Raman said that reports of his name being included have created “huge anguish” for him. BloombergQuint has reviewed a copy of the letter.

My only asset i.e. my character and my unimpeachable reputation is suddenly under a cloud. I need to clear my name and that has to be my first priority.
S. Raman In Resignation Letter To RBI Committee

Raman added that in keeping with the “lofty standards of corporate governance” recommended by the committees he has been associated with, he would not work with any government or regulatory committee until his name is cleared.

Raman was part of the PJ Nayak committee which reviewed governance of bank boards in 2014. He also assisted the Uday Kotak committee on corporate governance which submitted its report last year.

He started his career as a clerk in State Bank of India in 1977 and went on to become the chairman of Canara Bank in 2010. During his tenure, the bank raised nearly Rs 2,000 crore in equity from the markets despite the lack of investor appetite for public sector banks.

When contacted, Raman declined to comment further.

According to a June 29 PTI report, the CBI named Raman and another former Canara Bank Chairman AC Mahajan in the chargesheet. Winsome Diamonds defaulted on Rs 146 crore in loans taken from Canara Bank.

Raman explained his view on the case in his resignation letter, saying:

  • Canara Bank has less than 8 percent in the consortium where the leader has 40 percent.
  • His role as CMD was only in approving two annual renewals for the account in January 2011 and March 2012.
  • External rating by Crisil and internal rating were within acceptable levels
  • Conduct of the account was good with all banks.
  • All bank procedures were “scrupulously” followed and the internal reports of the banks do not indicate any lapses.

Winsome Diamonds defrauded banks of nearly Rs 7,000 crore.

Raman is the most recent in a string of bankers whose names have been included in chargesheets filed by investigative agencies looking into loan defaults. Officials from Bank of Maharashtra, IDBI Bank and Punjab National Bank have found themselves named in such chargesheets, with little clarity on their actual culpability.

On June 22, the Indian Banks Association condemned the spate of chargesheets and said that it’s taking up the matter with the government. Recently, former RBI governor YV Reddy said the “magnitude of the actions in recent months is unprecedented”.

Whether the raids and investigations will end up punishing the “really guilty” and act as a deterrent remains to be seen, he said. “But what is certain is that there is loss of confidence in the integrity of the banking system.”