/ 2 March 2017

Bank of Baroda begins closing Gupta-linked accounts

Indian businessmen
Indian businessmen

The Bank of Baroda’s South African unit has started closing accounts of companies controlled by the Gupta family, according to three people familiar with the matter, potentially leaving the friends of President Jacob Zuma without banking facilities in the country.

The Mumbai-based lender is winding down its relationship with companies related to the Gupta family to ensure it is in compliance with banking rules, the people said, asking not to be identified because the matter is confidential. The Guptas, who are in business with Zuma’s son, have been accused by opposition parties and some ruling party officials of using their friendship with the president to influence Cabinet appointments and government contracts. They have denied the allegations.

Oakbay Investments, the Gupta’s main holding company, said it wasn’t aware that Baroda would close its accounts.

“Oakbay is not aware of any such information,” the company said in an emailed response to questions. “I can only imagine that your source has their own agenda and wants to put pressure on Bank of Baroda.”

South Africa’s four biggest banks last year closed accounts linked to the Gupta family, giving them more than a month’s notice and citing the need to comply with international banking rules when dealing with customers and concern over their reputations. The family, led by brothers Atul, Ajay and Rajesh, asked Finance Minister Pravin Gordhan to stop the banks terminating the accounts, spurring Gordhan to seek a court order stating that he can’t prevent lenders from cutting clients.

‘Suspicious transactions’
Gordhan’s court application in October included a document from the Financial Intelligence Centre listing 72 reports of suspicious transactions totaling R6.8-billion that implicated members of the Gupta family and their companies. The family has asked the court to dismiss Gordhan’s application, while their lawyer has said that none of the transactions were dubious.

A Mumbai-based spokesperson for the Bank of Baroda didn’t immediately respond to an email and two calls to his office phone.

“We’ve not received any notice in this regard and can only investigate where this is coming from,” Gert van der Merwe, the Guptas’ lawyer, said by text message on Thursday about the Bank of Baroda closing accounts linked to the family.

The Bank of China’s South African branch dropped the Guptas as clients in September, according to court documents filed by the family in January. The public protector in November called for a judicial inquiry into the allegations against the Gupta family.

Political pressure
Salim Essa, a director of a company part owned by the Gupta’s Oakbay Investments, and Hamza Farooqui have bid to buy all of Habib Bank’s South African assets. At the beginning of February, the Reserve Bank recommended rejecting the bid for the Pakistan-based lender because of concerns about the source of the two businesspeople’s income and tax declarations, government officials with knowledge of the matter said at the time.

Political pressure on South Africa’s banks has since intensified with Zuma saying on February 10 the dominance of the country’s four major banks must end. The racial makeup of the banks’ leaders has also made the industry a target for politicians. Of the five biggest lenders, which together control about 90% of the local banking market, only Standard Bank has a black co-chief executive officer. – Bloomberg