Bank of Baroda chief hits back over Gupta scandal


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In an exclusive interview, Baroda chief executive PS Jayakumar admits failings in the bank’s South African operations, but denies institutional wrongdoing.

By Rashmi Kumar


Bank of Baroda became embroiled in a fraud in February when it emerged that the lender may have helped three South African businessmen of Indian origin to siphon off hundreds of millions of dollars.

But in an interview with Asiamoney, Baroda chief executive PS Jayakumar adamantly denies that the firm was involved in money laundering, and maintains that the bank’s withdrawal from South Africa is not connected to the scandal.


PS Jayakumar,
Bank of Baroda

The problems stem from Bank of Baroda’s relationship with the three Gupta brothers – Ajay, Atul and Rajesh Gupta – who relocated to South Africa from India in the early 1990s, and who are closely connected to South Africa’s recently ousted president, Jacob Zuma

The bank has been blamed for allowing the family to move millions of dollars tied to disputed transactions into offshore accounts and facilitating inter-company loans lacking in paperwork and seemingly with no commercial purpose.

Westdawn, a Gupta family-controlled shell company, had an account with Bank of Baroda for many years. The allegations against the bank in the Indian and South African media are numerous; Jayakumar chooses to address three of them.

One is that the bank provided a loan to Gloria Ngema Zuma – one of the wives of the polygamist former president – based on her credit history as an employee of the Gupta companies.

The second concerns claims that funds in the Guptas’ accounts benefited Duduzane Zuma, the former president’s son, who was reported to have a joint account at Bank of Baroda.

The third is that many of the transactions lacked adequate disclosures, as required by South Africa’s banking regulations.

Due diligence

“The reality is like this,” Jayakumar tell Asiamoney. “When we gave the loan [to Ngema Zuma], she was not married to Mr Zuma. She was like any other normal customer. There’s nothing wrong in giving loans to politicians’ wives, but she was not in that category. Subsequently, life situation changes, and so it did.”

There were also claims that Bank of Baroda had bent the rules when it provided the loan, but Jayakumar denies that. He says the bank had done its due diligence to ensure the client met the firm’s loan-to-value criteria, as well as other relevant multiples that Baroda applies to all of its retail customers. He adds that it was natural for them to deal with employees of companies Baroda already had a relationship with.

Regarding Zuma’s son, Jayakumar says he never had a joint account with Bank of Baroda and that the firm had no dealings with him deal whatsoever.

“As we go through the various criticisms that have been made, we find that we’re not there [in any of the situations] at all,” Jayakumar says.

Some of this is very misinformed information, misconception and wrong data 
 - PS Jayakumar, Bank of Baroda

On the third allegation, that Bank of Baroda failed to make adequate disclosures in its South African business, Jayakumar admits that “contemporaneous records” were not always adequate before the third quarter of 2015, when the bank stepped up its disclosures.

He adds that the bank provided a letter of comfort to the Guptas in 2015 for the purchase of a mine. This letter had not been authorized internally. But he rebuffs media reports that stated this was a guarantee.

“Some of this is very misinformed information, misconception and wrong data,” he says. “We’re also checking the allegations to see if we have missed some signals, and if something has happened without our knowledge. But there isn’t.”

He says that Baroda’s systems have been improved since the loans were granted six years ago. “In those periods, there was no [strict] process followed by other banks as well. But everyone is using today’s standards to judge old transactions and saying that, by the way, this should have been done. But at that point of time, these were not in vogue. And the issue of South Africa has still not shown us that we have wronged anybody.”

The lender has now officially closed its operations in South Africa. It said in a filing to the Indian exchanges that the move was in line with its “strategic plan for rationalization of overseas branches”.


Jayakumar insists the timing of the exit was coincidental and that the cut had been on the agenda for some time. “We have closed in three or four countries [recently] before coming to South Africa and it just culminated at the same time,” he says. “For us, the South Africa business was not even 1% of our balance sheet. It just doesn’t make sense for us to stay there.”

Jayakumar also addresses criticisms around why the bank had taken so long to close its accounts with the Guptas. Other South African and foreign banks closed their accounts with the family in the first or second quarters of 2016. Bank of Baroda could actually not close the accounts as a loan taken by the Gupta companies was still outstanding and there were deposits that couldn’t be pre-terminated, he adds.

“We went to the South Africa counsel and said we wanted to call back the loan, and they said it wasn’t possible without mutual consent,” Jayakumar says. “Our Indian counsel also said the same. So we ended up keeping the account, and when these deposits and loans matured, we asked them to be shut, by which time everyone else had closed their accounts.

“We went to the court and the court said that we cannot close the accounts because there were thousands of employees that needed to be paid. And then we became the only bank that had an account with [the Gupta family]. So the transaction volume obviously increased because it was consolidated with all other banks. These are obviously disposed of now because of the tightened environment. But things got exaggerated that we were having a large number of transactions. Why did it happen? It happened because we were forced to stay.”

He adds that after announcing the bank’s decision to shut up shop in the country, connections of the Gupta family – who are reported to have fled South Africa – have gone to court objecting to the closure.

Calls and an email to Oakbay Investments, the holding company for the Gupta family’s businesses in South Africa, were not returned.