Bank of Baroda dips on allegations of forex fraud

Bank of Baroda stock dipped as much as 8% to Rs 168 on the BSE in intra-day trade after the Central Bureau of Investigation (CBI) on Saturday carried out searches at the bank’s branches in New Delhi for alleged foreign exchange violations.

Besides alleged "illegal transfers" of foreign exchange of over Rs 6,000 crore from a branch in Delhi, a Rs 350-crore bill discounting scam in Gujarat has also damaged the bank's reputation.

BoB executives said RBI's loan approval to the troubled Atlas Jewellery Group through the bank's Dubai branch and transfer of executive director K V Rama Moorthy have also impacted the bank negatively.

Many BOB staffers Business Standard spoke to said that these episodes had caused not just a reputational loss, but had also caused unease within the organisation and impacted employee morale.

The events come as chief executive officer-designate P S Jayakumar is expected to take charge in the next few days. A former Citibank executive, he was selected in August from private sector firm VBHC Value Homes, where he was managing director and CEO.

BOB has been without a full-time CEO for about 14 months. The last full time CMD was S S Mundra. After Mundra move dto Reserve Bank of India as deputy governor in July 2014, the executive director has been handling daily operations.

A top public sector banker said “prolonged vaccum at top can have adverse impact. It is reflecting on the state of affairs at the bank. The organisation (BOB) indeed has competent people at various levels, but how long it could run on auto pilot mode?".

It is a warning signal for government that large institutions especially commercial banks can’t be allowed to be without a leader for long, he added.

One PSB executive familiar with BOB operations said that these events don't seem to be a systemic problem and that the damage can be undone with clear directions.

While acceptability is seen as an issue when someone from a private sector organisation joins a public sector one, but given the recent events BOB employees may actually welcome Jayakumar.

The risk is he may get bogged down with these issues, making it tough to push forward reforms and improve the bank's performance in the near term, the PSB banker added.

Bank Of Baroda