Disqualify and Ban Vakrangee as Financial Services-provider: AIBEA

Moneylife Digital Team 05 November 2022

Investor Interest

All India Bank Employees' Association (AIBEA) has demanded disqualification and a ban on financial services-provider Vakrangee Ltd for the company's repeated non-compliance with the rules and regulations of the Reserve Bank of India (RBI).

CH Venkatachalam, general secretary of AIBEA, in a letter to RBI governor Shaktikanta Das says, "...Vakrangee is a chronic and repeated violator of RBI rules and guilty of non-compliance of RBI norms relating to the undertaking of white-label ATM (WLA) services. It is a matter of serious concern that Vakrangee, one of the largest service-provider in extending financial services to various banks, lacks integrity, honesty and transparency in its operations and hence RBI had to impose such fines on them."

Earlier this month, RBI imposed a monetary penalty of Rs1.76 crore on Vakrangee for non-compliance with certain provisions of the WLA directions.

"This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the entity with its customers," RBI says.

Last year in August 2021, also RBI imposed a fine of Rs1 crore on Vakrangee for a similar offence and non-compliance.

"It is important to recall that this Vakrangee applied for a license to start a payment bank. We believe that RBI has not granted them the license to start a payment bank," the bank employees' union says, adding, "In this background, we strongly feel and demand that Vakrangee should be disqualified and banned to act as a service provider for extending financial services to any bank."

AIBEA also alleged that "many banks are utilising Vakrangee for various services which otherwise are banned by RBI such as account opening by obtaining know-your-customer (KYC) and e-KYC documents, scouting, and scrutiny of loan proposals that involves risk including reputational risk."

"Some of the banks are using the employees of Vakrangee to work on the bank counters going beyond RBI directions in this regard. RBI should look into these aspects so that Banks do not get into problems besides safeguarding the interest of the customers," Mr Venkatachalam says.

Further, AIBEA says it observed that, at present, banking correspondents or bank mitras (BCs) are being employed by various private companies and agencies and provided to banks for their services. "These Agencies not only exploit the BCs with inadequate commissions and remuneration but are also resorting to unethical practices which may land the banks into avoidable problems."

"Vakrangee is only the tip of the iceberg. We demand that BCs should be designed as a separate cadre of employees of banks with defined duties, fair wages and service conditions," Mr Venkatachalam from AIBEA says.

As reported by Moneylife in 2018, Vakrangee has remained controversial for at least two decades, no matter the high profits it consistently reported. There is the zigzag trajectory of its stock. It is frequently under investigation for price manipulation and is a favourite of scamsters; so questions about its credibility don't stop.

A historical fact-check is important. Vakrangee was Harshad Mehta's favourite stock on his comeback attempt. Those days, Harshad Mehta had befriended Dilip Pendse (who committed suicide in July 2017, frustrated with 16 years of court battles), former managing director of Tata Finance who was once considered the group's financial whiz-kid. Mr Pendse got Tata Finance and its subsidiary to purchase a 6% stake in Vakrangee starting 2 October 1999, when its price was Rs258, through Nishkalp Investment and Trading Company, its controversial subsidiary. The Tata purchase gave respectability to Vakrangee, although the set of stocks purchased by Nishkalp eventually dented the Tata image and cost it big money. (Read: Vakrangee's Chequered History)

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