Bank of Baroda vs BR Shetty: Over 100 anti-money laundering alerts were generated on NMC Health group accounts

In the alleged fraud and round-tripping case involving Abu Dhabi-based NMC Healthcare, founded by Indian-born healthcare entrepreneur Dr BR Shetty, internal emails from Bank of Baroda’s compliance teams to branch officials and others reportedly indicate that more than 100 money-laundering alerts were generated but allegedly disregarded by those handling and sanctioning loans worth millions to NMC Healthcare.

BR Shetty has now filed a suit against Bank of Baroda and several officials in the Bombay High Court, seeking around $15 billion in damages. The lender, meanwhile, has said that it “has not been served with such a suit and cannot comment on the contents of pleadings which are untested in court”. “If and when the Bank is served, the Bank will defend the suit firmly and take all steps necessary to protect its interests,” it said.

Emails and documents reveal that, in view of the alleged round-tripping scheme, Bank of Baroda’s own systems generated more than 100 anti-money-laundering alerts on NMC group accounts. According to sources, not one resulted in a meaningful enquiry, escalation or report.

Two instances are illustrative. In January 2016, an officer at the bank’s zonal office asked its Abu Dhabi branch to check the KYC details and AML alerts on seven named accounts, describing the matter as important and saying the request had come at the instance of a correspondent bank. The Abu Dhabi officer replied that all seven accounts were NMC-related.

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On September 8, 2016, the bank’s Anti-Money Laundering Compliance Team wrote to the Abu Dhabi branch flagging potential “round-tripping” in NMC group accounts. It said funds were moving between group accounts without economic purpose and called for the transactions to be reviewed from an anti-money-laundering perspective.

The transfers allegedly continued for more than three years afterwards. Dr Shetty was never informed that transactions on his accounts had been flagged. When the bank later reported the matter to the Reserve Bank of India, it said the fraud had come to light only through a forensic audit and did not disclose the 2016 alert.

These documents, according to the allegations, suggest that the bank did not fail to detect the fraud but detected warning signs and nevertheless continued its dealings.

The Case

The alleged fraud case against Dr BR Shetty involves $5.4 billion. The trial against him began in Abu Dhabi in April this year.

The allegations are that Shetty orchestrated the $5.4 billion fraud, driving NMC Healthcare into debt, and that further rounds of transactions through loans taken from Bank of Baroda and a few other banks were carried out to cover it up. The alleged fraud also affected thousands of investors on the London Stock Exchange.

Short seller Muddy Waters published a report in December 2019 questioning NMC’s balance sheets. Further disclosures followed, revealing that NMC had debts exceeding $6.6 billion.

The Enterprise

Dr Bavaguthu Raghuram Shetty was born in Kaup, Udupi, in 1942. He moved to Abu Dhabi in 1973 and opened New Medical Centre in 1975, starting with a single pharmacy, dental clinic and laboratory. It became Abu Dhabi’s first private hospital in about 1988.

In April 2012, NMC became the first healthcare company from the Gulf, and the first from Abu Dhabi, to list on the premium segment of the London Stock Exchange, entering the FTSE 100.

By 2017, it was the UAE’s largest private healthcare provider, with more than 200 facilities across 17 countries, over 18,000 employees, including 3,000 doctors, and more than 8.5 million patients treated annually.

Shetty acquired UAE Exchange in 1980 to help expatriate workers remit money home. By 2017, it had around 800 branches and remittances exceeding $50 billion. Neopharma, his pharmaceutical plant, was inaugurated in 2003 by Dr APJ Abdul Kalam. Group revenues were around $4 billion. Shetty received the Abu Dhabi Award in 2005 and the Padma Shri in 2009.

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The Handover and The Lending 

According to disclosures made by Dr BR Shetty to Abu Dhabi authorities and courts, Prasanth and Promoth Manghat entered his employment between 2001 and 2003. By 2016-2017, they had allegedly induced him, then in his 70s, to relinquish control altogether so he could turn to philanthropy. He resigned as NMC’s chief executive officer in early 2017 and as a director in February 2018.

Bank of Baroda had been Shetty’s personal banker since the early-to-mid-1970s, a relationship spanning around 45 years, and was NMC’s primary banker until about 2019.

However, every Bank of Baroda facility now in default is allegedly dated after the handover: September 12 and 25, 2017; November 23, 2017; December 13, 2017; May 7, 2019; and June 9, 2019.

Each is said to be secured by a personal guarantee in Shetty’s name. He says he signed none of them and alleges that his signature was forged or reproduced from a stored electronic template.

The Structuring 

According to legal documents filed by Dr BR Shetty with various authorities in India and Abu Dhabi, Bank of Baroda allegedly colluded with its officers to defraud the companies. The allegations refer to findings previously attributed to Alvarez & Marsal and claim that the bank participated in the round-tripping scheme allegedly perpetrated by the Manghat brothers and discounted forged invoices on which the scheme operated.

Correspondence from March 2015 records that S B Parashar, then at Bank of Baroda’s Abu Dhabi branch, repeatedly demanded invoices for high-value transfers on two accounts held in the names of sham entities.

An internal email dated March 31, 2015, records that, after a meeting, Parashar wanted both sides to meet him together so he could explain how to structure the transactions in an acceptable manner. It also required documentation for every transaction above $5 million in both directions, while NMC staff were separately told to prepare invoices as agreed.

The bank subsequently discounted trust receipts and invoices raised on entities alleged to be sham suppliers, carrying signatures reportedly lifted from a stored template.

Separately, around AED 376 million of NMC funds is alleged to have been routed to a false account in Shetty’s name, transferred to an account with Bank of Baroda and then returned to NMC, allegedly making him appear to be a party to transactions about which he knew nothing.

Undisclosed Lending

The alleged embezzlement created a large gap in the companies’ financials, while the round-tripping scheme inflated revenue that did not genuinely exist.

Bank of Baroda allegedly stepped in to support the companies through unsecured financial facilities that were not disclosed to their boards. In March 2020, NMC reported more than $2.7 billion in facilities that had never been disclosed to or approved by its board.

When the group’s exposure approached the maximum permitted in the UAE, facilities of Neopharma and UAE Exchange were split and shifted from Bank of Baroda’s Abu Dhabi branch to its Dubai International Financial Centre branch. This was allegedly done to enable continued lending to a group whose accounts the bank had reason to doubt.

A bank officer maintained a spreadsheet of the branch’s exposure, including exposure to Shetty’s own accounts. However, Shetty was never shown it, and no account statement was ever sent to him.

Nil Collateral 

Bank of Baroda allegedly granted the above-mentioned loans, amounting to approximately ₹2,000 crore, without collateral. This is said to be evident from proceedings filed by Shetty challenging the Look Out Circular against him.

When the Karnataka High Court asked counsel for Bank of Baroda and Punjab National Bank what security had been accepted for such large exposures, the response was that the borrowers were listed on the London Stock Exchange and their share values indicated a high net worth.

The order dated February 12, 2021, records that details of tangible assets mortgaged and their valuation were not forthcoming. The judge observed that public sector banks permitting exposures of that magnitude without adequate security was a matter of great concern, could have a serious adverse impact on the economy, and warranted lawmakers and the Reserve Bank of India revisiting lending guidelines to ensure public money was secured before disbursement.

The bank’s own return records collateral security as “Nil” and states that there was no tangible security, while also describing the security as valid and enforceable.

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Suspected Illegal Gratification 

In his defence, Shetty’s legal team has argued that the alleged collusion by Bank of Baroda is explained by evidence of corruption.

A forensic review of the group’s electronic records reportedly produced a message dated October 12, 2016, from Sabina Salgaokar, executive assistant to Prasanth Manghat, to Manghat. It recorded that a gift had been sent to Parashar: an Apple iPad Pro 128GB worth AED 3,006.75, with the amount described as all-inclusive, including gift wrapping. The message also recorded that a colleague had spoken to him about an introduction to another bank official.

Separately, on November 3, 2018, an NMC treasury analyst sent draft internal minutes of a general body meeting of NMC entities to Jaideep Sharma, then senior manager, credit, at Bank of Baroda, using his personal email address rather than an official banking channel.

The allegations also refer to high-value gifts and payments to bank employees, including electronic devices, luxury goods, premium watches, air tickets and holidays.

The No-fault Return

After the fraud came to light in February 2020, Bank of Baroda allegedly sought to place the entire blame on Shetty. It sued him in the UAE and India and filed two Fraud Monitoring Returns dated December 28, 2020, for its Abu Dhabi branch with the Reserve Bank of India. The bank later produced these before the Karnataka High Court.

The Returns name UAE Exchange Centre LLC as the perpetrator and list Shetty first among its directors. They describe the fraud as “Cheating and Forgery” and “Diversion of Funds” and put the bank’s loss at AED 371.972 million, approximately ₹751.38 crore.

Against the question of whether staff were involved, the answer was “No”. Asked whether the controlling office could have detected the fraud, the answer was “No”. On whether the information system needed improvement, the answer was “No”. The entries for any internal investigation or departmental enquiry and staff-side action were also “No” and “Nil”, respectively.

The returns placed the blame on the customer and exonerated the bank’s officers. They also recorded that, in the bank’s own UAE recovery case, a court had on October 18, 2020, ordered a forgery and handwriting expert to examine the validity of signatures on the loan documents. This fact was allegedly not disclosed to the regulator or the court when Shetty was named.

The Travel Ban

Bank of Baroda allegedly procured a Look Out Circular against Shetty through law enforcement agencies on May 8, 2020, eleven days after he complained to the UAE Federal Attorney General seeking an investigation. The bank sued him four days later.

Shetty was stopped at Bengaluru airport on November 14, 2020, without being given a reason.

On February 9, 2024, the Karnataka High Court held that Look Out Circulars could not be issued at the instance of banks solely to support civil recovery. It recorded that Shetty had been unlawfully prevented from leaving India for more than three and a half years without valid justification.

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The Settlement

The joint administrators of NMC companies sued Bank of Baroda over claims reported at close to $5.4 billion, alleging that the bank had committed fraud and wilfully neglected its obligations by failing to meet anti-money-laundering and know-your-customer requirements, thereby facilitating the alleged fraud. The bank denied the allegations throughout.

On July 2, 2026, it announced an out-of-court settlement of approximately $600 million, or around ₹5,700 crore, with the joint administrators of NMC Health PLC, NMC Healthcare Ltd and NMC Holding Ltd. The settlement covered proceedings before the ADGM Court of First Instance and the High Court of Justice of England and Wales.

The bank said its liability was limited to that amount and that the settlement involved no admission of liability or wrongdoing.

The bank had earlier alleged fraud by UAE Exchange, part of the NMC Group, and claimed losses of around ₹750 crore. About five years later, it paid ₹5,700 crore to the group’s administrators – seven and a half times the loss it had claimed in 2020.

Bank of Baroda made no financial provision against the claims. In its annual report for the financial year ended March 2026, months before the settlement, the bank told shareholders it had a strong chance of successfully defending the case. It therefore classified the matter as a contingent liability, with no amount set aside against it.

The Cost 

Bank of Baroda paid ₹5,700 crore from a public sector bank to the NMC administrators.

In addition, approximately ₹2,800 crore lent to the group by Bank of Baroda and Punjab National Bank – around ₹2,000 crore and ₹800 crore, respectively, according to figures recorded by the Karnataka High Court – is said to be unrecoverable because all the borrower companies are in administration or liquidation.

The resulting loss to the public exchequer is therefore estimated at no less than ₹8,000 crore, borne by the country’s depositors and taxpayers.

In Sum

According to the allegations, the Manghat brothers took control of the companies Shetty had built over four decades and brought Bank of Baroda into the lending circle. They allegedly colluded with bank officers to defraud the companies by routing funds through accounts opened in Shetty’s name without his knowledge, discounting forged invoices and trust receipts, and disregarding more than 100 of the bank’s own money-laundering alerts.

The allegations further state that Bank of Baroda lent, rolled over and extended facilities without security, despite knowing the companies could not repay them because the alleged embezzlement was hollowing them out.

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When the scheme collapsed, the bank allegedly sought to place the blame on Shetty, who says he was no longer in control. It procured a Look Out Circular that a court later held was unlawful and filed a return with the Reserve Bank of India naming him as a director of the alleged perpetrator while clearing its own officers.

The bank subsequently settled the administrators’ claims for ₹5,700 crore without admitting wrongdoing, having made no provision against the claims. The total cost to the public exchequer is estimated at around ₹8,000 crore.

Shetty, now 84, is left to bear the remaining burden, according to his account of the case.