BENGALURU: Can money raised by the Bangalore Development Authority from aspiring site owners be parked in high-risk investment instruments like mutual funds, though the plots remain elusive for years? Can the agency tasked with ensuring sustainable and orderly growth of Bengaluru resort to unauthorized monetary transfers to assorted government agencies like the Coffee Board, Bangalore Metro Rail Corporation and Karnataka Backward Classes Department Building Construction Society which builds student hostels?
Not by the rule book. But that's what BDA has been doing with impunity for nearly two decades, TOI has learnt from official sources. What's more, BDA has neither got back a single paisa of the money illegally transferred nor interest towards it for nearly a decade. Ironically, most illegally transferred money too landed in mutual funds.
BDA commissioner T Sham Bhat confirmed his agency's investment in mutual funds and unauthorized fund transfers to the Coffee Board, BMRC and the construction society. He said he has written to these three organizations to returns the funds with 12% interest from the day the fund was transferred.
"As a government agency, BDA should not have invested in mutual funds. Yes, it has happened. Now, I have taken measures to completely stop it and invest in fixed deposits. I don't know the exact amount invested by BDA in mutual funds, but it runs into hundreds of crores of rupees. The Comptroller and Auditor General (CAG) is looking into the issue and its final report will throw more light on it. Meanwhile, acting on the CAG's suggestions, I've written to the three government agencies to which funds were transferred illegally. We have not received any reply so far," Sham Bhat told TOI.
The BDA doesn't have any note on why the funds were transferred and whether there were any terms at all, sources admitted.
Established in 1976, the primary revenue source for the BDA, besides government grants, is the money it raises from site and housing aspirants in the guise of registration fee and preliminary deposits. Lakhs of people have registered for buying sites from the BDA over the past few decades. More than 2 lakh site aspirants had applied for the jinxed Arkavathy Layout in the past decade and deposited money to the tune of Rs 900-plus crore. Most of the 8,818 site allottees are yet to gain possession of the plots.
The BDA has not been able to completely execute any of its layout development plans for over a decade. But that didn't stop the agency from resorting to illegal investments and fund transfers. It has been parking money in mutual funds since 1997 and this came to the state government's notice only a year ago.
More shockingly, BDA has been diverting its own funds to other government agencies to invest in mutual funds.
In December 2014, the state government requested the CAG to conduct a special audit to look into BDA's investments in mutual funds. The CID too is looking into the issue.
CAG sleuths learnt that BDA had diverted Rs 5.4 crore to Coffee Board during 2002-03, Rs 3 crore to BMRC in June 2007 and Rs 2.12 crore Karnataka Backward Classes Department Building Construction Society in June 2006.
According to sources privy to the issue, a bureaucrat couple facilitated some of the fund transfers by opening unauthorized accounts of their respective agencies in a national bank branch in Kumara Park West.
It's a shocking revelation. The only way to prevent such malpractice is to make any file movement electronic so that transparency is maintained. Any financial transaction must have a counter signatory. BDA must put out an annual financial statement of all its accounts, like any firm, and the officer who releases it must be liable for it. As BDA is both a planning and executive authority and falls under numerous portfolios of the chief minister, it escapes scrutiny. The CAG's final report would be interesting. Ideally, the government has to find out the officers involved in this and check if they did similar malpractice in other postings.
Ashwin Mahesh | civic analyst
* It clearly shows that bureaucrats heading various positions in BDA during that period were involved in the scam and they had a nexus with agents to invest in mutual funds and thus got a commission for it. Agencies like BDA are behaving like a real estate agency. Being a custodian of public money, BDA has recklessly violated rules and that's shocking. The officers involved must be punished. As a civil society, we'll take up this issue.