Bank of Baroda’s Overseas Controversies Back in Focus After $600 Million NMC Health Settlement
Bank of Baroda has once again come into focus over its international banking operations after agreeing to pay US$600 million, around ₹5,700 crore, to settle the NMC Health litigation. This amount is equal to the one quarter profit of Bank of Baroda.
The latest settlement has raised questions about the bank’s overseas dealings, particularly because Bank of Baroda had earlier faced serious regulatory and compliance scrutiny in South Africa during the Gupta family controversy.
Bank of Baroda’s earlier international history has again become relevant as questions are being raised over transparency and accountability in large overseas transactions involving a public sector bank.
Bank of Baroda Pays $600 Million to Settle NMC Health Litigation
Bank of Baroda recently reached an out-of-court settlement with NMC Health PLC, NMC Healthcare Ltd, NMC Holding Ltd and their joint administrators. Under the agreement, the bank will pay US$600 million, or approximately ₹5,700 crore, through its Abu Dhabi branch.
The Bank said that it’s not wrong but then why Bank paid such a huge amount has raised questions. Bank said that this amount is being paid to end the legal case.
NMC Health was once a large healthcare company in the United Arab Emirates (UAE). In 2020, the company collapsed after investigators discovered billions of dollars of undisclosed debt and financial irregularities.
As per sources, Bank of Baroda was made a party to the NMC case over allegations related to transactions, due diligence, and compliance with anti-money laundering and Know Your Customer requirements. Click here to read this case in detail.
Bank of Baroda Had Earlier Faced Scrutiny in South Africa
This is not the first time Bank of Baroda’s international operations have attracted major attention. The bank was earlier caught in a serious controversy in South Africa over its banking relationship with companies linked to the Gupta family.
The Gupta family was at the centre of South Africa’s major “state capture” controversy. The controversy involved allegations that the family used its political connections to influence government decisions and state-owned companies.
During 2016, several major South African banks closed accounts linked to Gupta-owned businesses because of compliance and reputational concerns. Bank of Baroda, however, continued providing banking services to several Gupta-linked companies for a period after other banks had withdrawn. Investigative reports later examined millions of dollars in transactions that moved through Gupta-linked Bank of Baroda accounts.
South African Authorities Penalised Bank of Baroda
Bank of Baroda also faced regulatory action in South Africa. The South African Reserve Bank imposed a R11 million penalty on the bank in connection with compliance failures.
The South Africa controversy attracted significant attention because Bank of Baroda is owned by the Indian government and had become an important banking service provider to Gupta-linked companies after several other banks had ended their relationships with those businesses. Investigative reports raised serious questions about the bank’s internal controls and monitoring of transactions. These reports contained allegations and concerns; they should not be treated as a court finding that Bank of Baroda itself participated in the alleged corruption.
Gupta-Linked Companies Tried to Stop Bank of Baroda From Leaving South Africa
Bank of Baroda later decided to close its operations in South Africa. Interestingly, companies linked to the Gupta family approached the court in an attempt to prevent the bank from leaving the country.
In March 2018, the High Court in Pretoria dismissed an application filed by 19 Gupta-linked companies seeking to stop Bank of Baroda from closing its South African operations. The court said the bank had the right to decide whether it wanted to continue trading in the country.
The South African Reserve Bank confirmed at the time that Bank of Baroda had informed the Registrar of Banks about its decision to exit. The regulator said it was working with the bank to ensure an orderly withdrawal and protect depositors.
Bank of Baroda Also Reviewed and Closed Other Overseas Operations
Around the same period, Bank of Baroda started rationalising its international presence. The bank initiated the closure of operations in South Africa, Bahrain and the Bahamas as part of a wider review of its overseas business.
The bank officially described these decisions as part of the strategic rationalisation of its international operations and in line with the Government of India’s directions regarding the overseas presence of public sector banks.
Bank of Baroda also reviewed operations in other international markets, including Ghana and Trinidad and Tobago. The stated objective was to improve efficiency and profitability by reducing operations that made a very small contribution to the bank’s total business.
It is important to note that the closure of overseas operations does not automatically mean that a bank was involved in wrongdoing in those countries. Banks regularly close foreign branches because of low profitability, high compliance costs, regulatory changes or changes in business strategy.
Bank of Baroda Had Also Disclosed a Penalty in Seychelles
Bank of Baroda had also earlier disclosed a monetary penalty relating to its operations in Seychelles. Reports in 2018 referred to a fine of around ₹42.26 lakh.
At that time, reports said detailed reasons for the Seychelles penalty were not clearly explained in the disclosure being discussed. The issue was much smaller in financial size compared with the South Africa controversy or the latest NMC Health settlement.
