Judgment reserved in Gupta bid to keep Bank of Baroda in SA

01 March 2018 - 14:27 By Nico Gous
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A man walks past the Bank of Baroda headquarters in Mumbai, India, May 3, 2016.
A man walks past the Bank of Baroda headquarters in Mumbai, India, May 3, 2016.
Image: REUTERS/Danish Siddiqui/File Photo

Judgment has been reserved in the urgent court application by 19 Gupta-linked companies to prevent the Bank of Baroda from closing its South African operations.

Judge Ntendeya Mavundla said in the High Court in Pretoria on Thursday that he initially considered dismissing the application based on the prima facie evidence.

“The matter raises‚ in my view‚ the fundamental question: Must the courts oblige banks to stay in the country against their will or business to keep its doors open?”

The application started out on behalf of 20 Gupta-linked companies‚ but was reduced to 19. On Thursday it was reduced further to 13‚ because six of applicants are in business rescue.

Nedbank informed Baroda at the end of January that it would be cutting ties with the bank within three months. That means that from April 1‚ Baroda will not have banking facilities with Nedbank‚ on which it relies to provide banking services to its own clients until it leaves South Africa.

This includes the Gupta-linked companies that brought the urgent application. Baroda said it would not accept any deposits into Baroda accounts from March 1‚ because it wanted to wind down its affairs before the end of its agreement with Nedbank.

Baroda has a correspondent banking relationship with Nedbank in South Africa. That means Nedbank clears Baroda’s transactions. Clearing banks deal directly with each other via control accounts.

The South African Reserve Bank (SARB) administers these control accounts. A non-clearing bank is not directly involved in processing transactions and operates via a correspondent bank which serves as its clearing bank.

Baroda informed the Gupta-linked companies on July 6 last year that it was ending its relationship with them. It said these companies had created their own predicament by not finding another bank in the meantime.

Judge Tati Makgoka ordered Baroda in October last year to continue providing banking services to the Gupta-linked companies to protect their 7‚000 employees. He also prohibited the bank from ending its relationship or closing the bank accounts of the Gupta businesses.

The Gupta-linked companies argued that if Baroda left South Africa‚ it would contravene Makgoka’s judgment.

Mavundla will deliver judgment on March 12.

This is a developing story.

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