Nedbank is cutting ties with the Bank of Baroda.
This emerged in an affidavit Bank of Baroda CEO Manoj Jha filed at the High Court in Pretoria.
Jha said this would make it "impossible" to provide banking facilities to any of its customers. This includes the 20 Gupta-linked companies, which launched an urgent court application on February 16 to stop Baroda from shutting its South African operations.
Jha disclosed in his answering affidavit that Nedbank gave notice at the end of January that it intended ending its relationship with Baroda within three months. Baroda will then not have banking facilities with Nedbank, on which it relies to provide banking services to its own clients.
Baroda has had a correspondent banking relationship with Nedbank in SA. That meant Nedbank cleared Baroda’s transactions. Clearing banks deal directly with each other via control accounts.
The Reserve Bank administers these control accounts. A nonclearing bank is not directly involved in processing transactions and operates via a correspondent bank, which serves as its clearing bank.
Jha added that Baroda would therefore 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.
He said Baroda informed the Gupta-linked companies on July 6 that it was ending its relationship with them. He said these companies had created their own predicament by not finding another bank.
"More than seven months have passed since it was informed of the respondent’s decision to terminate its banking relationship with them … Instead of procuring an alternative bank‚ the applicants have ridden the crest of [Judge Tati] Makgoka’s order for as long as possible."
In October, Makgoka ordered Baroda 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.
Baroda wanted to join the four major banks in SA — Absa‚ Standard Bank‚ Nedbank and FNB — in closing Gupta-linked accounts. The Bank of China also closed Gupta-linked accounts.
The Gupta-linked companies argued in their urgent application that if Baroda left SA‚ it would contravene Makgoka’s judgment.
Oakbay Investments director Ronica Ragavan argues in her founding affidavit that Makgoka had ordered that Baroda could not limit the banking of these companies.
Baroda disputes Ragavan’s interpretation of Makgoka’s judgment. It says the order did not prevent it from closing down operations.
Baroda announced in January it was closing down its South African branches after its parent company in India decided to downscale global operations.
Jha said more than R100m in various accounts belonging to the Gupta family‚ their associates and companies — that was frozen by the National Prosecuting Authority’s Asset Forfeiture Unit (AFU) — would be placed in a trust with Standard Bank. This money is in relation to the Estina dairy farm.
He added that other money‚ which included the R2bn Optimum and Koornfontein rehabilitation funds that were also frozen‚ would also be placed in the trust account.
The urgent application was set down to be heard on Thursday.