The Economic Times Title : To Clean up System, Banks Turn Screws on Middlemen Author : SANGITA MEHTA Location : MUMBAI Article Date : 08/11/2014 Arrest of Syndicate Bank chairman SK Jain over charges of corruption triggers move State-owned Indian Bank and Andhra Bank are cracking down on middlemen, who act as facilitators between lenders and borrowers, to clean up the system after the recent arrest of the Syndicate Bank chairman and company executives over corruption related to enhancing credit limits.

While Indian Bank has banned middlemen or arrangers from entering the premises, Andhra Bank has stipulated that an intermediary should always be accompanied by a borrower.

State Bank of India doesn't plan any changes to its policy as it follows a rigorous due dili

gence process, said chairman Arundhati Bhattacharya. SBI accounts for 20% of all loans.

Syndicate Bank chairman and managing director SK Jain

was arrested by the Central Bureau of Investigation on August 2 over charges of corruption.

He was arrested for seeking . 50 lakh in bribes to increase loan limits for Prakash Industries and Bhushan Steel. CBI also arrested some intermediaries who were said to be negotiating the bribes. The August 4 memo issued by Indian Bank CMD TM Bhasin was explicit: “It has been ensured that no middlemen or arrangers to meet top management so as to avoid extraneous pressures or obligations,“ it said, adding, “Middlemen or arrangers should not be entertained at the zonal and branches level.“

It further said that that all official meetings with the CMD, ex ecutive directors and general managers will be held in conference or meeting rooms that have CCTV cameras with a notice making clear that proceedings were subject to surveillance. Also, the bank has directed staff that visitors should only be allowed to carry with them papers, laptops and tablets that are required for meetings or discussions with an X-ray machine installed at the entrance to check those who come in. While many banks are taking a closer look at their policies, the banking regulator is considering measures to improve corporate governance. “There are some good middlemen and some notso-good middlemen. A good middleman acts as a broker. But if the point of a middleman is to pay bribes, that is obviously not OK. It's part of the whole set of governance issues that we need to look at,“ Reserve Bank of India governor Raghuram Rajan said last week. The central bank under Rajan has been campaigning for banks to take a tough line on bad loans that act as a drag on finances.

“Intermediaries will be there, they are unavoidable. How to regulate them is an issue,“ said CVR Rajendran, CMD of Andhra Bank.

Andhra Bank has made it mandatory for officers to mention from where or from whom the loan proposal originated.

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