Why Sudhir Fell In Trouble; New Details Cite Gov’t
By Our Reporters
New details have emerged painting a three dimension pyramid shedding light on how Crane Bank owner Sudhir Ruparelia got into his current predicament. The three dimensional theory shows the role played by NSSF MD Richard Byarugaba, PSST Keith Muhakanizi and BoU management led by governor Emmanuel Mutebile.
The role the executive is alleged to have played in constraining the hand of BoU from making timely intervention is also part of today’s briefing. As for Byarugaba, sources say, he together with his NSSF top management, took decisions that incapacitated Crane Bank from readily meeting BoU liquidity requirements.
It will be recalled that, with a portfolio of over Shs8tn, NSSF is one of the best depositors any commercial bank can have. They operate by placing these trillions on fixed deposit accounts with different banks and financial institutions.
This enables NSSF make money on the deposits by way of interest charged but it’s also a good way for commercial banks to mobilize monies for short term lending. So Crane is one of the commercial banks where NSSF savings were for many years being kept. However, sometime last year Byarugaba got credible economic intelligence reports showing that Crane Bank wasn’t doing well.
His reliable sources at BoU Supervision department informed him that all wasn’t well with Crane Bank and there are things Sudhir needed to fix very quickly. Byarugaba communicated his fears to Sudhir (the two were tight buddies) and urged him to put his house in order or else there wouldn’t be fresh commitment to continue holding NSSF’s billions there.
Byarugaba reportedly assured Sudhir “much as you are my friend this isn’t personal money it’s for the savers the NSSF members who are my bosses-I’m only a steward and should something happen, those people will have me for dinner for not acting responsibly to ensure their savings are safe.” Sudhir promised to fix the areas of concern Byarugaba had raised from leaks from the regulator.
By that time the NSSF fixed deposits at Crane Bank had grown to Shs700bn. Sudhir didn’t improve the Crane Bank situation as fast as Byarugaba required. He continued getting alerts from his BoU sources that the situation at Crane Bank was only worsening.
He swiftly directed the withdrawal of the Shs700bn in a phased manner to minimize impact on personal friend Sudhir’s bank. The business was moved to Standard Chartered bank that was rightly considered safer (though foreign-owned) and when the first transfer was made, instead of putting his house in order people believed to be his agents resorted to calling for negotiations with Byarugaba who ignored them insisting this wasn’t personal but strictly work.
The agents then resorted to hunting for Board Chairman Patrick Kaberenge urging him to use his powers to direct Byarugaba on this matter. When this failed, efforts were made to urge Crane Bank BOD Chairman Joseph Biribonwa to be the one to speak to Kaberenge since he is his fellow Munyoro. It was suggested Kaberenge’s very thirsty beak can be wet and then he helps to persuade his boss Matia Kasaija, the line Minister and fellow Munyoro, to use his powers and order Byarugaba.
We are told Biribonwa flatly declined the assignment to go and lobby Kaberenge saying he was too professional for such underhand methods. In the end time was lost and Byarugaba moved to withdraw even the remaining money, a thing that condemned Sudhir to serious problems as in far as Crane Bank’s liquidity needs were concerned.
The loss of Shs700bn in just months was the biggest blow that hurt Crane Bank’s ability to meet borrowers’ needs. It also prompted BoU to see how vulnerable the situation had become for Sudhir and pressure mounted on him.
In almost the same period, PSST Keith Muhakanizi implemented reforms that left CAOs in local governments disempowered regarding the leverage they used to have to give business to Sudhir’s upcountry branches. Muhakanizi’s reforms required that all the districts are subjected to a central account at BoU from where all the local governments’ funds would be controlled and scrutinized from. All of a sudden district CAOs that had leeway to fix billions of shillings in Sudhir’s bank through the upcountry branches, that were strategically situated to cash in on local governments, found themselves powerless and incapable of maintaining the financing relations they had with Sudhir.
“Muhakanizi’s reforms were prompted by the Kazinda scandal and donor pressure was too much. This too greatly hurt Sudhir’s bank as it eroded its liquidity capabilities and he could no longer mobilize cash for lending,” said a source adding that efforts to talk to Muhakanizi flopped after the arrogant man from Rukungiri refused to meet Crane Bank agents for some peace talks and beak-wetting sessions.
Sudhir became distraught and tried to use political pressure but Museveni and his aides in State House and first family turned their back on him and denied him audience. At the same time the BoU demands kept mounting putting him in disarray. We are told BoU could have helped the situation by giving him money to improve his liquidity situation and gradually get the bank back on its feet. He was willing to stake his buildings as security but BoU declined.
They insisted that he gets the money and improve the liquidity situation of Crane Bank. One of the financial analysts we spoke to partly blamed BoU by saying: “It’s most likely because they had been lenient with him too long and were always under political pressure from State House to be patient with Sudhir but on this occasion they wouldn’t even risk giving him the money and this is why options ran out on him.”
We are further told that sometimes some powerful figures in State House would ring Mutebile begging to be allowed time to speak to Sudhir to comply with regulation requirements. Another analyst maintained that BoU had the money but, perhaps guided by Sudhir’s track record of riding on political connections (he unofficially donated $62m to NRM 2016 campaigns), they couldn’t risk doing that anymore.
The same analyst disclosed being told by sources in BoU that Mutebile could have acted much earlier on shutting up Crane Bank but always feared Museveni, who was always very proud of the Sudhir success story as a Uganda-bred entrepreneur, would furiously respond and he finds himself in problems. There are also reports that in order to annoy Museveni, some agents friendly to BoU originated fake intelligence reports which disclosed to Museveni that besides funding NRM, Sudhir (like many businesses do) was also funding the other political candidates including Besigye and Mbabazi.
We are told this false report, which Sudhir’s key advisor Andrew Mwenda confirmed to us sometime back, left Museveni very agitated, something that gave BoU the impression Sudhir was now at his weakest with Museveni or State House having no appetite to defend him and they acted.
To Sudhir (who freely houses DP headquarters and K’la FDC office at his City House) this must have been a strategy to patronize all the different political groups so that on a bad day none of them has the moral authority and guts to raise a finger.