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Dfcu: Fake News Perpetrators Undermining Uganda’s Banking Sector, Economy

Dfcu Bank, Uganda’s second largest financial institution, has described as “fictitious”, claims on social media that its top leadership influenced the purchase of Crane Bank.

Bank of Uganda took over the bank owned by controversial businessman Sudhir Ruparelia in 2016, saying there was “no other option” as the financial institution was “massively insolvent” as a result of “mismanagement and fraud”.

Sudhir has since been taken to court on charges of bank fraud, with BoU seeking recovery of over Shs 400bn allegedly siphoned by the real estate businessman.

Governor Tumusiime Mutebile later said Dfcu was a “suitable” bank which ensured no depositor lost money after the transfer of assets and liabilities from Crane Bank.

Following the takeover of Crane Bank, a negative media campaign was unleashed on dfcu bank.

Dfcu bank has since warned Sudhir’s son, Rajiv Ruparelia, also a former minority shareholder in the defunct Crane Bank, of legal consequences if he didn’t desist from financing a fake news campaign against the institution.

Sudhir and his son Rajiv (R) who is accused of financing and coordinating a fake news campaign against dfcu banks and its leaders

The bank’s lawyers of Kalenge, Bwanika, Ssawa and Co. Advocates in a recent letter, threatened to sue Mr Rajiv for Corporate Defamation, Interference with Dfcu business, Criminal Libel and Offensive Communication.

Officials say, despite these warnings, the fake news campaign is yet to abet, threatening the reputation of one of the most successful banks in Uganda.


Dfcu speaks out

In a statement sent to ChimpReports on Tuesday, dfcu’s Company Secretary, Agnes Tibayeita Isharaza said over the past several weeks there has been “false, misleading or fictitious information on social media and in articles disseminated in some online publications about the Bank, its Chairman Mr. Jimmy D. Mugerwa and Chief Executive Officer Mr. Juma Kisaame.”

The reports alleged that Mugerwa connived with former BoU Executive Director in charge of Supervision, Justine Bagyenda to keep Crane Bank’s bad books off the records.

But Isharaza dismissed the claims as false.

“dfcu Bank unequivocally states that there is no substance to the articles,” she said, adding, “We would like to reiterate that this is a deliberately orchestrated effort by a few individuals with total disregard of the impact this has on the confidence of the Banking Sector, Uganda’s economy and the reputation of good people.”

Without identifying individuals, Isharaza warned that the Bank reserved the “right to institute legal proceedings against those perpetuating these malicious stories.”

Isharaza’s concerns come against the backdrop of a statement issued by Uganda Bankers’ Association calling on the relevant government authorities to stop the negative campaign from crippling the banking sector.

“Targeted and calculated negative reporting about the banking sector has the potential of undermining confidence in the industry and risks triggering undesired panic with unintended adverse consequences for the economy,” the association warned.

ChimpReports understands President Museveni has been briefed about the financing of the campaign against dfcu and has since promised to take action.

How dfcu took over Crane Bank

According to Mutebile, Crane Bank had been losing liquidity for months prior to its takeover by the BOU.

This was because a large share of its loan portfolio was not being serviced by the borrowers and because customers were losing confidence in the bank and withdrawing their deposits.

At the time, allegations of fraud reportedly orchestrated by Sudhir were rife in the public domain.

Between the end of June 2016 and the end of September 2016, Crane Bank’s deposits fell by Shs 148 billion.


As its liquidity drained away, Crane Bank requested liquidity support from the BOU, before the bank was taken over by the BOU.

At this point, the BOU had two possible courses of action; either to provide liquidity support to Crane Bank or not to do so.

Mutebile explained that if the BOU had chosen the latter course of action, Crane Bank would have been unable to honour its liabilities.

“It would not have been able to pay depositors who wanted to withdraw their money from the bank or repay the money it had borrowed from other banks in Uganda through the interbank market,” said Mutebile in an address to bankers recently.

“In effect Crane Bank would have collapsed. Because Crane Bank was such a large bank, its collapse would have risked chaos in the financial system, possibly causing contagion to other banks and bank runs by depositors,” he added.

“That would have caused a huge amount of economic damage. No responsible Central Bank could allow this to happen.”

Apart from the Shs 466 billion of liquidity support to Crane Bank, the BOU also spent Shs 12 billion in resolving Crane Bank.

The Central Bank said these were expenses that were necessary to ensure that the assets and liabilities of Crane Bank could be transferred to another bank, thereby allowing Crane Bank’s customers to continue having access to normal banking services.

“This was the cost of ensuring that Crane Bank did not collapse in a disorderly manner, threatening chaos in the banking system and the wider economy and ensuring that its customers retained access to their deposits and to banking services,” said Mutebile.


BOU has since moved to recover Shs 200 billion of this money through the sale of assets and purchase of assumption transaction which transferred assets and liabilities of Crane Bank to DFCU Bank.

The BOU is in the process of attempting to recover the rest of the money it had to provide Crane Bank from Crane Bank’s shareholders such as Sudhir, who were responsible for the bank’s huge losses.

In a suit before the Commercial Court, BoU argues that $80m was siphoned from Crane Bank by Sudhir Ruparelia on October 26, 2013 and over $9.2m was “extracted” from the institution purportedly for the supply of core banking systems and software licences.

According to the documents, over $3.5m and more than sh8.2b was taken out of the bank on December 27, 2014 disguised as credit facilities to Infinity Investments Limited and eventually written off as bad debts under Sudhir’s instructions.

Sudhir is also accused of fraudulently concealing his shareholding through his fronts who he reportedly used to take money from the bank.

Nevertheless, Isharaza urged “members of the public to treat these articles with the contempt they deserve and be assured that dfcu Bank remains a solid bank whose leadership has overseen its growth to become the second largest bank in Uganda. The board, management and staff of dfcu Bank across Uganda remain committed in service to its customers and our nation.”

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