The RBI report had said BoR funds were misused or diverted through loan sanctions, bill discounting and investments in companies which were related to the Bangurs. The central bank inspected the banks books for the period ended March 1997 -- when Keshav Bangur and S N Bangur were directors of BoR -- and submitted the report in late 1998.

``Credit supervision was grossly inadequate. The bank had allowed facilities which were immediately diverted to the accounts of Bangur Finance through various current accounts of different parties, a majority of which were closed subsequently. Several accommodationbills were purchased/discounted by the bank. The major portion of the proceeds of bill purchased of various parties were diverted to Bangur Finance and certain bills returned unpaid were still lying unadjusted,'' the RBI report said.

The RBI investigation has described several illegal deals by the Bangurs. ``It was observed with deep concern that in certain cases enumerated below from the limits allowed by the bank, funds were immediately diverted to the account of Bangur Finance Ltd through certain other companies. All the accounts subsequently became NPAs and the bank was likely to suffer financial losses,'' the RBI said.

It said the bank has not meticulously followed RBI instructions on income recognition, asset classification and provisioning resulting in wide divergence between banks and inspectors assessment of NPAs and provisions. The gross NPAs of the bank were assessed at Rs 301.70 crore (18.7 per cent) as against Rs 194.91 crore (12.1 per cent) reported by the bank. ``Additional provision of Rs82.54 crore was assessed by the inspector for loan losses,'' the RBI said.

The Calcutta branch of BoR had released PCLs (packing credit limits) aggregating Rs 34.50 crore to six borrowers without ensuring end-use of funds, without obtaining LC/firm export orders and without complying with other terms and conditions of sanction. ``The branch had in majority of the cases disbursed the amounts on the date of sanctions themselves. The amounts were diverted to the account of Bangur Finance through a number of current accounts... majority of these accounts were closed subsequently,'' the RBI report revealed.

During the period under investigation, the managing director had exceeded his powers 49 times and had not reported to the competent authority in five cases. The RBI had brought several illegal transactions. ``Amay Drugs, where the borrower was related to director of the bank, was over-financed despite actual sales being 10 per cent of what was projected and debt-equity and current ratios were not allsatisfactory. The branch manager of Fort (Mumbai) had allowed withdrawal against uncleared effects on April 4, 1996 of Rs 12.09 crore and on May 13, 1996 of Rs 0.50 crore to Bangur Foundation in which S N Bangur, director of the bank, was interested. This was not reported to the competent authority for confirmation,'' the report said.

The RBI report has disclosed that a packing credit limit of Rs 5 crore was disbursed on February 6, 1996 to Bangur Nirman Nivesh. On the same day, the entire amount was transferred to four companies.... which in turn transferred the amount to Bangur Finance on the same date. ``Irregularities were observed in sanction of packing credit limits to certain borrowers by the bank's Calcutta (CR) branch as also in the post-disbursement supervision resulting in large scale diversion of funds to the account of Bangur Finance through a network of companies in a planned manner,'' the RBI said.

The RBI has also come down heavily on the top management including some of the directors andgeneral managers of the bank. ``The top management was extremely lax in examining and fixing staff accountability for certain serious lapses. The report says two delegations from Bank of Rajasthan had visited Nepal during 1996-97 without the permission of the bank's board. The visit to Nepal was supposedly to set up a joint venture bank in Nepal. ``It may be pointed out that the decision to send a delegation was taken by one of the directors, Keshav Bangur, without the approval of the board. No report on the visit of the delegation was available,'' the RBI report said.

RBI sources estimate that out of Rs 300 crore NPAs of the bank, over 50 per cent is due to the defaults of companies related to the Bangurs.