Is the DRI being stalled by SBI on the over-invoicing of Coal imports?

Is the DRI being stalled by SBI on the over-invoicing of Coal imports?
Is the DRI being stalled by SBI on the over-invoicing of Coal imports?

While throwing her hat into the race for the next Reserve Bank of India (RBI) Governor post, State Bank of India (SBI) Chairman Arundhati Bhattacharya is in the spotlight for her reluctance to share the money laundering information by the coal importing corporate houses through SBI’s Singapore, Hong Kong and Dubai branches.  Under Prime Minister’s Office’s stern direction, the Directorate of Revenue Intelligence (DRI) was asked to probe into the Coal Importing Scam from Indonesia ranging over ₹30,000 crores ($4.47 billion) by some importers who allegedly may have inflated coal prices and siphoned off profits.

The DRI sensed a huge scam in coal imports from Indonesia. In a nutshell, it is an instance of the over-invoicing of coal. Even though the ships directly land in India from Indonesia, the bills were routed through fictitious and benami firms in Singapore, Hong Kong and Dubaibefore landing in India. Using the benami shell companies, mostly owned by the importing Indian Corporates, a killing was made by selling coal at inflated prices, which ultimately ends up with common man by paying extra cost to the electricity consumed.

This over-invoicing in coal import scam started from 2008 onwards. In India 90% of the coal is imported from Indonesia with about 5% from Australia. Among the coal imports from Indonesia, 70% is executed by Adani Group of companies and second biggest importer is Anil Ambani’s Reliance Group companies, which ranges around 5%. The other significant importers are Essar Group, JSW Steels and private operators for state governments and PSUs engaged in power production.

The major banks involved in the money transfer and over-invoicing are State Bank of India, Bank of Baroda(BOB) and ICICI Banks’ branches in Singapore, Hong Kong and Dubai. Scams in India seldom happen without the help of bankers. 85% of the fraudulent over-invoicing happened through SBI’s foreign branches. Bank of Baroda’s foreign branches handled around 10% and ICICI Bank handled around 5%. The sum total of these sham transactions is worth a staggering ₹30,000 crores ($4.47 billion).

The DRI found that by these over-invoicing methods, the value of coal was inflated to more than 250% by these corporate houses. After getting the nod from the Prime Minister’s Office (PMO), DRI sent notices to SBI, Bank of Baroda and ICICI Bank. Only ICICI Bank cooperated with DRI and submitted all the details of over-invoicing, which exposed the 250% over-billing, which directly affects the price of electricity.

Both the Public Sector Banks SBI and Bank of Baroda(BOB) chose to keep a stony silence. Revenue Secretary Hasmukh Adhia on May 20, wrote to the SBI Chairman Arundhati Bhattacharya that they must share the details sought by the DRI. But she rejected Revenue Secretary’s direction claiming some laws of Singapore and other foreign countries on “secrecy”. DRI has knocked on the doors of Revenue Secretary after the public sector banks denied information.

The communication between Revenue Secretary Hasmukh Adhia and SBI Chairman Arundhati Bhattacharya is published below. PGurus well-wishers in the banking sector told us that RBI Governor Reghuram Rajan also did not co-operate with DRI officers who sought his help in tracking the over invoicing in Coal Import Scam.

If ICICI Bank can give details of the their branches in the same foreign countries, why can’t SBI and BOB? Is Arundhati Bhattacharya protecting some corporate houses and stalling the Revenue Secretary? How this affects her chances of becoming the RBI Governor is a million dollar question as this is a probe ordered by Prime Minister Narendra Modi’s office.
DRI-SBI correspondence Page 1
DRI-SBI correspondence Page 2
DRI-SBI correspondence Page 3

Question for Ms. Bhattacharya:
We have carefully read the Rule S47 of the Banking Secrecy Act of Singapore. Your letter is quoting Item 1 of the act in Page 2. We think that when the request is coming from a government, the interpretation should be done according to Item 5 of the act in Page 3.
The entire Rule 47 of the Banking Act of Singapore is reproduced below:Singapore Mas Rules 47


Is Arundhati Bhattacharya protecting Coal importers who indulged in over-invoicing?