The South African Reserve Bank (Sarb) is reportedly investigating Bank of Baroda (BoB) over money held for companies controlled by the controversial Gupta family, Bloomberg News reported on Thursday.
A source familiar with the matter told the news website the central bank’s probe came after the Organisation Undoing Tax Abuse (Outa) alleged in court papers that mine-rehabilitation funds held for two of the Guptas’ coalmines had been mismanaged and used to repay loans.
The source, who spoke on condition of anonymity because the matter was confidential, said while there was no evidence of the trust funds being used as collateral or mismanaged, BoB may have contravened its own rules about having significant exposure to certain clients.
Last month, Outa won an urgent interim interdict in the Pretoria High Court against BoB – the only lender in South Africa still offering services to Gupta-linked companies – which froze some R1.75 billion in the Gupta-owned Optimum and Koornfontein coalmines’ rehabilitation trust fund accounts.
Mine rehabilitation funds cannot be used for purposes other than managing the environmental damage caused by mining activities, according to the Mineral and Petroleum Resources Development Act and the National Environmental Management Act.
In June, the Sarb fined BoB R11 million and issued the bank with a directive to improve its monitoring and reporting of unusual transactions.
The spokesperson for the Gupta family did not respond to requests for comment from Bloomberg News, while the Sarb declined to comment.
Gupta accounts to stay open for now
On Monday, Gupta companies obtained an interim order allowing their bank accounts with BoB to stay open pending further legal action.
Judge Tati Makgoka ordered BoB to keep the bank accounts of 20 Gupta-linked companies open and operational in the same manner as before pending further legal action they must institute within the next 15 days.
He also prohibited BoB from calling up the loans and overdrafts of four of the companies’ accounts open pending further legal action.
The order follows an earlier ruling by another judge in the same court, who dismissed a similar application by the 20 companies in the Guptas’ Oakbay group of companies to keep their accounts open and stop the bank’s demand to repay their loans by September 30.