Risky Investment: Rs 3.55 Billion of Public Funds Invested in Silver Bank

The controversy-ridden Silver Bank is now under investigation by the Financial Crimes Commission (FCC) amid concerns over the handling of over Rs 3.55 billion in public funds. The bank, which was placed under temporary administration by the Bank of Mauritius in February 2024, is at the centre of mounting questions about mismanagement, political influence, and potential financial crimes.

This information comes from a recent parliamentary response detailing the entities involved and the origins of the investments.

The opposition had raised questions about this issue before November 2024, but it remained unanswered until now.

The Prime Minister, Navin Ramgoolam, revealed that Rs 3.55 billion of public money was invested in Silver Bank Limited, which was placed under administration by the Bank of Mauritius in February 2024 and is now being investigated by the FCC.

This information was provided in a written response to a parliamentary question submitted by Govinden Venkatasami on May 6.

According to the Prime Minister’s document, the public funds were invested through several government or state-linked entities.

The Projects Development Fund alone contributed Rs 3 billion.

Established in April 2020 by then-Finance Minister Renganaden Padayachy, this fund was initially named the COVID-19 Projects Development Fund.

Its purpose is to finance projects included in the Public Sector Investment Program, as well as any other approved projects, plans, or programs. It also covers associated consulting, preparation, and advisory services.

The fund supported various initiatives, including social housing, major road projects, and infrastructure development in Côte d’Or.

The majority of the public funds invested in Silver Bank came from the Projects Development Fund.

Other contributors included the National Insurance Company Ltd (Rs 150 million), NIC General Insurance Co. Ltd (Rs 125 million), the Curepipe Municipal Council (Rs 87.7 million), the Sugar Insurance Fund Board (Rs 40 million), the Mauritius Housing Company Ltd (Rs 100 million), and the Port-Louis Municipal Council (Rs 45 million).

Parliamentary Response: Silver Bank Under Temporary Administration

In a recent parliamentary response, Prime Minister Navin Ramgoolam explained that Silver Bank was placed under temporary administration by the Bank of Mauritius on February 13, 2024, in accordance with Article 65 of the Bank of Mauritius Act.

He stated that there were valid reasons to believe that Silver Bank’s capital was potentially compromised and that its directors may have engaged in practices harmful to depositors’ interests.

This temporary administration allowed the central bank to appoint an administrator to stabilize the institution while suspending the rights of shareholders and the board of directors.

Background of Silver Bank: A Post-Acquisition Transformation

According to the Prime Minister’s response, Silver Bank Limited received a new banking license on November 11, 2021, following its rebranding after acquiring BanyanTree Bank Limited.

This acquisition was approved by the central bank after a due diligence process and a recapitalization by the new shareholders.

Questions are now being raised about potential connections between the bank’s leaders and certain political or economic figures from the previous government.

The Financial Crimes Commission (FCC) has launched an investigation into the bank, focusing on allegations of mismanagement, conflicts of interest, and possible financial crimes.

Several internal documents from the bank have been seized, and hearings are currently underway.

The Silver Bank case has political implications, as the FCC seeks to determine whether the previous government invested high-risk funds in the bank in exchange for favors from former regime decision-makers.

It is important to note that some of these investments may never be recovered, as the actual value of the bank’s assets is considered nearly worthless.

According to the Governor of the Bank of Mauritius, Rama Sithanen, during a press conference last December, there remains Rs 522 million from the Ministry of Finance in the bank, likely part of the Rs 3 billion from the Projects Development Fund.

However, the situation is less clear for other investments. Rama Sithanen stated that the chances of recovering funds from Silver Bank are extremely slim, as the bank’s assets “are not worth much.”

Public Accounts Committee Report Raises Concerns Over Silver Bank

A report from the Public Accounts Committee (PAC), published in May 2023, highlighting troubling issues regarding Silver Bank.

It mentioned a meeting involving representatives from the Ministry of Finance, the Ministry of Regional Administrations, and the municipal councils of Port-Louis and Curepipe.

During this meeting, it was allegedly advised not to withdraw funds deposited in the struggling bank to avoid its liquidation.

The PAC noted that no minutes were taken during this meeting and criticizes the pressure placed on local authorities, contradicting a 2019 ministerial circular that explicitly recommended investing in government bonds.

The report stated, “Conflicting accounts were presented to the PAC regarding the reasons for the meeting, the discussions held, the decisions made, and the recommendations given.

No minutes were recorded. However, a representative from the Curepipe municipal council referred to her notes and indicated to the PAC that ministry representatives advised local authorities against withdrawing their deposits to prevent the bank’s liquidation, which could have led to partial or total loss of those funds.”

Following this meeting, the Curepipe municipal council decided to renew its deposit with the bank, with only one councilor opposing the decision during a meeting on August 27, 2021.

The PAC concluded that certain officials from the Ministry of Regional Administrations and/or the Ministry of Finance “attempted to influence the representatives of the Port-Louis and Curepipe municipal councils to renew their deposits with Silver Bank Ltd (formerly known as BanyanTree Bank Ltd), acting in the interest of Silver Bank Ltd rather than the local authorities.”

A Bank with Troubling Connections

Silver Bank replaced the already controversial BanyanTree Bank Ltd and obtained a banking license despite having questionable owners.

The main shareholder, Ginny Gupta, holds 75% of the shares through a company registered in the Cayman Islands.

Her husband, Prateek Gupta, was one of the main beneficiaries of loans from the bank and is at the center of an international scandal, accused of orchestrating a $577 million (Rs 26.9 billion) fraud against the commodity trading giant Trafigura through fictitious nickel shipments. No convictions have been made so far.

In Mauritius, Prateek Gupta reportedly received Rs 8.3 billion in loans from Silver Bank, according to Rama Sithanen.

These loans continued to be granted despite initial attempts by the Bank of Mauritius to halt them. Political interventions are believed to have facilitated this ongoing lending.

In 2023, the then-opposition, now in power, raised questions about the governance and beneficial owners of Silver Bank.

MP Reza Uteem, now the Minister of Labour, questioned the government about potential links between Prateek Gupta and the shareholders.

Sunil Bholah, then the acting Minister of Finance, cited Article 26 of the Bank of Mauritius Act to maintain banking secrecy.

In response to a question from Arvin Boolell then Leader of the Opposition, former Finance Minister Renganaden Padayachy provided a similar answer, stating that the Bank of Mauritius could not disclose this information. Speaker Sooroojdev Phokeer then prevented any further questions.

Source: Defi Media