According to reports from Mint, Bank of Baroda received internal alerts about alleged 'roundtripping' of funds by the NMC Group as early as 2016. The bank's anti-money laundering (AML) unit sent at least three alerts to its Abu Dhabi branch, specifically pointing to circular transactions where funds were being sent out and returned to create false business activity. Despite these warnings, the state-owned lender continued sanctioning fresh loans and bank guarantees to the NMC Group from September 2017 to June 2019.
As reported by Mint, Shetty and his companies owed Bank of Baroda ₹2,077 crore as of May 2020, which represented approximately one-third of the settlement amount the lender paid. The bank ultimately settled the legal battle involving healthcare companies founded by Abu Dhabi-based businessman BR Shetty for $600 million in July. The settlement cost the bank almost thrice its dues to Shetty and his companies, highlighting the significant financial exposure from the continued lending despite internal warnings.
According to Mint reports, bankers emphasized that the cost of not acting on AML alerts is substantial, with such failures potentially leading to massive implications for lenders. A director at a large bank noted that if a bank does not act on alerts specifically pointing to circular transactions, it could raise questions about staff accountability. The regulatory bar for such failures is extremely low, making compliance critical for maintaining banking standards.
As reported by Mint, Bank of Baroda informed the Reserve Bank of India (RBI) on 28 December 2020 of alleged fraud committed by Shetty in the loan account of group company UAE Exchange Centre. The bank had started a forensic audit after receiving adverse media reports on the BR Shetty Group accounts. The account was tagged as fraud in December 2020, after the bank received the audit report in September 2020. A deputy general manager was tasked with investigating staff accountability and suspected fraud, though the exact nature of staff action taken was not disclosed.
According to Mint reports, Debadatta Chand, CEO of Bank of Baroda, told reporters on 24 July that the recovery process against the principal individual would continue. Regarding staff accountability, he stated that every bank has its own process, either taken or to be initiated. Shetty has consistently denied allegations of wrongdoing, telling Mint in July that if the bank had not done anything wrong, why should it be paying even $1. The bank emphasized that the settlement resolves all claims between the parties without any admission of liability or wrongdoing.
