RBI, SEBI tightens screws on Bank of Rajasthan

The Reserve Bank of India (RBI) has tightened the screws on the Bank of Rajasthan (BoR) further with the appointment of two Deloitte entities to conduct special audit of the private sector bank's books and accounts.

While Deloitte & Touche Consulting India will conduct special IS audit, a special audit of the bank's books and accounts will be carried out by Deloitte, Haskins & Sells. Both audits would likely be completed in about 45 days along with a report for further action, according to a bank official.

The RBI appointed a new chief executive and two RBI officers on the bank's board following reports of numerous instances of violation of corporate governance. The central bank has also appointed two nominee directors.

The RBI had in February 2010 imposed a Rs25-lakh fine on the Jaipur-based lender for violation of regulations on five counts. The violations included violation of RBI directions on acquisition of immovable property deletion of records in the bank's IT system, non-adherence to know-your-customer (KYC) and anti-money laundering (AML) norms, irregularities in the conduct of accounts for certain corporate groups and failure to provide certain documents to RBI and misrepresentation of the non-availability of the documents.

Meanwhile stock market regulator Sebi has banned 100 entities related to the Bank of Rajasthan (BoR) from market transactions. These include several members from the BoR's promoters, the Tayal family, from all stock market-related activities. Several of the entities banned are Tayal-controlled firms directly or through friends and associates.

Acting on the RBI's reference, Sebi conducted an investigation into the shareholding patterns in BoR since 2007, which revealed that the banned entities were acting in connivance with the Tayals to corner BoR shares. This enabled the family to disclose a shareholding pattern in conformance with RBI rules relating to promoters' holding in banks. However, the same shareholding pattern failed to conform to the RBI's thrust for the separation of control and management.