The banking community is mobilising the Indian Banks’ Association (IBA) to take up with the government authority the arrest of former State Bank of India chairman Pratip Chaudhuri in an alleged loan scam case. 

“We hope that it will be soon sorted out,” SBI chairman Dinesh Khara said while referring to the arrest of Chaudhuri as “extremely unfortunate”.

In an apparent gesture of support for the former SBI chairman, Khara said executives at the top level in the bank don’t get involved in small ticket loans or resolutions. They are invariably dealt with at local level, he added.

On November 1, the Rajasthan police arrested Chaudhuri on a complaint made by a defaulter who lost his hotel property during a resolution process.

“It appears that the individual was not given an opportunity to be heard before issuing the arrest warrant. We have utmost faith in the country's judicial system and are confident that Chaudhuri will be released unconditionally at the earliest," Khara told reporters.

Chaudhuri was chairman of SBI between April 7, 2011 and September 30, 2013.

“As far as SBI is concerned, we adhere to the best practices in corporate governance. And I can assure you that as far as the bank is concerned, there has been no irregularities in the said case and prescribed rules and the processes were followed by the bank in dealing with this account. We have got the structure in place and we are quite confident that our people across the hierarchy can take decisions in such matters," said Khara.

On November 1, Jaisalmer police arrested Chaudhuri on allegations that Garh Rajwada, a hotel project of the Godawan Group in Jaisalmer which was financed by the bank in 2007, was sold to Alchemist ARC below the market price. 

Allegations against the former SBI chief include properties worth Rs 200 crore being undervalued and sold for Rs 25 crore after the bank seized them for defaulting on the loan. The Godawan group had taken a loan of Rs 24 crore from SBI in 2008 to construct a hotel. 

The borrowers alleged that Chaudhuri joined Alchemist ARC,   which took over the property after undervaluing it, as one of its directors. This led to the Godawan Group approaching the court. During the assessment of the sold properties in 2017 after Alchemist ARC took them over, it was revealed that the market price was Rs 160 crore and currently the properties are valued at Rs 200  crore, the Godawan Group alleged.

This is the first time that a chairman of India’s largest bank has been arrested in an alleged loan scam, prompting some senior bankers to come to the defense of Chaudhuri and SBI to say that no processes were violated in the asset sale.

The borrowers alleged that Chaudhuri joined Alchemist ARC,   which took over the property after undervaluing it, as one of its directors. This led to the Godawan Group approaching the court. During the assessment of the sold properties in 2017 after Alchemist ARC took them over, it was revealed that the market price was Rs 160 crore and currently the properties are valued at Rs 200  crore, the Godawan Group alleged.

This is the first time that a chairman of India’s largest bank has been arrested in an alleged loan scam, prompting some senior bankers to come to the defense of Chaudhuri and SBI to say that no processes were violated in the asset sale.

Reacting to the news, former SBI chairman Rajnish Kumar said the arrest seems to be a motivated and high-handed action”. “This seems to be an error of judgment. There is a due process and set of rules laid out by the RBI for the sale of assets to ARCs. Where is the corruption here?”. 

Former SBI deputy managing director Sunil Srivastava said in a tweet: "Absolutely pathetic, is the system being gamed again by defaulters despite all efforts by Modi govt, time for overhaul of judicial processes to improve transparency and introduce accountability @PMOIndia."

He further questioned Chaudhuri's arrest stating "without notice and without summons, how can police from another state arrest someone in Delhi, where is the due process of law.