Parliamentary Committee Meets on Bank of Uganda Probe

Today marks the third day of summons before the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase).

The committee, which is chaired by Bugweri County MP Abdu Katuntu, is investigating the events surrounding the closure of seven commercial banks between 1993 and 2016, namely Teefe Trust bank, International Credit bank ltd, Greenland bank, Uganda Cooperative bank, National Bank of Commerce, Global Trust bank and Crane bank.

One of the more controversial cases is that of Crane Bank Limited (CBL). Crane Bank was the third largest bank in Uganda but it became insolvent, resulting in a Shs 450bn injection by BoU. The bank was subsequently taken over by the BoU in October 2016 in order to ensure its financial stability. An agreement with Dfcu bank was then fostered, and CBL was sold to Dfcu in 2017, with the bank taking on some assets, customer deposits and various liabilities.

The BoU subsequently filed a lawsuit against former Crane Bank owner and major shareholder Sudhir Ruparelia and his company Meera Investments for the alleged swindling of Shs 397 billion from the bank in fraudulent transactions and transfers.  A high-level investigation into the extent of this alleged fraud is reported to have been carried out by PWC, the findings of which have yet to be made fully available. 

In what has been perceived as an aggressive defensive strategy, Ruparelia responded with a countersuit seeking compensation of Shs 28 billion in damages for breach of contract. Since then a number of attacks have been launched against the BoU and various officials, suggesting that the Bank failed to follow due process and that as a result CBL shareholders have been left out of pocket. The committee is expected to scrutinise these accusations as it questions the shareholders and various parties who worked on the transactions. 

However, to date there has been little examination of how Crane Bank came to be so devalued in the first place that it required rescuing. Further details of this are likely to be uncovered as the case continued to develop. 

With Uganda’s leadership continuing to bang the drum internationally for a larger share of foreign direct investment for the country, the spotlight on Crane Bank’s demise is already proving to be an unhelpful distraction. Depending on the details still to come out on the role played by the banks shareholders, it could prove to be far more damaging than that.