NEW DELHI – A new banking fraud involving a shipping company based in the western state of Gujarat has prompted fresh questions about the lending practices of Indian banks.
The Central Bureau of Investigation (CBI), India’s top probe agency, has named ABG Shipyard Ltd, the company’s former chairman Rishi Kamlesh Agarwal and others in the case.
ABG Shipyard, incorporated in 1985, is a major private sector shipbuilding company and has facilities at Surat and Dahej in Gujarat.
The fraud is related to loans amounting to about 228 billion rupees (RM12.6 billion) from more than two dozen banks and their diversion for purposes other than those mentioned in borrowing the funds.
The CBI filed the “first information report” (FIR) in the case on February 7.
State Bank of India (SBI), the biggest public sector bank and part of the consortium, provided important details of the case in a press release yesterday.
“Fraud is mainly attributed to diversion of funds, misappropriation and criminal breach of trust,” it said.
According to documents posted with the FIR on the probe agency’s website, ABG Shipyard owed 70.89 billion rupees to ICICI Bank, 36.39 billion rupees to IDBI Bank, 29.25 billion rupees to SBI, 16.14 billion rupees to Bank of Baroda, 12.44 billion rupees to Punjab National Bank, 13.27 billion to Exim Bank of India and 12.28 billion rupees to Indian Overseas Bank.
The case is being described as India’s biggest-ever banking fraud, eclipsing the US$2 billion (RM8.4 billion) scam at Punjab National Bank involving jewellers Nirav Modi, Mehul Choksi and others in 2018.
India’s recent banking scandals have been labelled as “loot and escape” schemes as those involved have managed to leave the country after the scams.
Billionaire Vijay Mallya, who fled to Britain in 2016 as banks were trying to recover US$1.4 billion in loans from his defunct Kingfisher Airlines, was a Parliament member and famous for his extravagant lifestyle.
After the latest mega default, questions are again being asked about bank lending procedures in the country.
The main opposition Congress party yesterday alleged that ABG Shipyard and Rishi Agarwal used the memorandums of understanding signed with Gujarat state during the “Vibrant Gujarat” investor conferences to influence banks for taking loans.
ABG Shipyard’s loan account became a non-performing asset in July 2016.
The fraud by the accused came to light after a forensic audit report in August 2019.
“Several efforts were made to revive the company operations but could not succeed,” SBI said.
Although ICICI Bank was the lead lender in the consortium and IDBI was the second lead, it was SBI that reported the matter to the probe agency.
The bank filed the first complaint with CBI in November 2019, leading to exchange of information between the consortium and the agency.
A “fresh and comprehensive second complaint” was filed by SBI in December 2020.
ABG Shipyard is undergoing the process of liquidation in the National Company Law Tribunal.
A number of other high-profile defaults have occurred in the last few years, with the amount of bank loans running into billions of US dollars.
One involves Nitin Sandesara, who owned Gujarat-based pharmaceutical company Sterling Biotech. According to reports in the Indian media, the company was involved in wilfully defaulting on bank loans worth 53.83 billion rupees, and Sandesara fled to Nigeria in 2017 when his business came under the scanner.
Jatin Mehta of Winsome Diamonds & Jewellery, was another top defaulter, owing more than 80 billion rupees to a consortium of banks. He is believed to have settled down in Europe. Mehta was suspected of diverting bank money to a number of foreign locations through dummy companies. – Bernama, February 14, 2022
