Accounting regulator Institute of Chartered Accountants of India (ICAI) probe panel has hit out at banks for not doing due diligence on Satyam Computer Services before giving loans, and wondered why the government put Deepak Parkeh on its board despite his HDFC group being a major creditor to Ramalinga Raju’s company.
“There is no explanation as to why the banks… while sanctioning short-term loans did not seem to have posed any question as to why the company which was supposedly cash rich as per its financial statement was taking loans from them,” said the ICAI in its final report on the Saytam scam.
The banks that gave loans to Satyam during 2000-08 despite the company claiming huge surpluses, were HDFC Bank (Rs 530 crore), Citibank (Rs 223.87 crore) Citicorp Finance (Rs 222.28 crore), ICICI Bank (Rs 40 crore) and BNP Paribas (Rs 20 crore), totalling Rs 1221.16 crore.
The high-powered group of ICAI, headed by former President Uttam Prakash Agarwal, also questioned the appointment of HDFC Chief Parekh on the board of Satyam to revive the IT company following the scam. “…the Committee is unable to understand how the Chairman of HDFC Bank was appointed as an independent director post Satyam fiasco,” said the report, which has been submitted to ICAI’s council for further action. Although Parekh, who heads HDFC, is not the Chairman of the Bank, the reference in the report is to him only, said a member of the committee when contacted.
Following the admission of the fraud by Raju in January 2009, the government superseded the then Satyam board appointing its own nominees who, besides Parekh, were Kiran Karnik, T N Manoharan, S B Mainak, C Achutan and Tarun Das.
The committee has also recommended disciplinary action against “the audit firm, its partners…the then Chief Financial Officer (CFO) and the head of internal audit department.”