Cases of defaults in public sector are many. List of accounts causing loss to banks either b fraud or by bad debts is long. Scam after scam are coming to light which were hitherto hidden in the system. CMDs of banks who were involved in credit scam or who are responsible for rise in volume of bad debts in PS banks have either retired or promoted to higher level. They have earned lacs of rupees as incentive from MOF as because they booked credit growth higher than target allocated to them. Same CMD who earned huge incentive are now denying wage hike to bank staff when they take part in Bipartite settlement from the platform of IBA
After Kingfisher, Winsome diamonds, Deccan Chronicles, Bhusan Steel and many cases of default exposed in recent past , now case of Mahua TV has erupted causing a loss of Rs.1724 crore and another cases of Rs.9800 crore of Jet Airways in in pipeline. Hundreds of others will follow.
Wait .... positive minded politicians and bureaucrats are hopeful of achhe din in banks.
They (gang of CMD in IBA and Ministers in GOI) allow lacs of crores of rupees lost in bad debts, another lacs of crores lost in write off of bad loan, another lacs of crores locked in restructured loans and so on. But they are not ready to agree to give respectable wage hike to staff who are innocently working day and night for keeping their bosses happy and for doing service to politicians, poor villagers and all. Very soon bank staff will also realise that they are being cheated by top officials to whom they salute all the time with the hop that they will take the bank to greater height.
Mahuaa TV raised Rs 1,724 crore in loans through deception-Times of India
NEW DELHI: Investigations into how Bhojpuri channel Mahuaa TV — one of the biggest bank loan defaulters -- raised hundreds of crores from PSU banks reveal that almost everyone seemed to have dipped into the cash pot of India's banks, or at the least, feigned willful ignorance as every norm was broken. Along with it, there was forgery and fraud.The details are startling. Through five companies, Mahuaa TV's promoters raised Rs 1,724 crore from 14 nationalized banks. The highest amount of Rs 760 crore went to Century Communication, while Rs 334 crore went to Pearl Vision, Rs 234 crore to Mahuaa, Rs 201 crore to Pixion Media and Rs 195 crore to Pixion Vision.
On August 20, TOI had reported the possibility of India's second biggest loan defaulter, Winsome Group, diverting most of the loans raised from PSU banks abroad.
According to available details, the way Mahuaa TV obtained the loan reflects the rot in the Indian banking sector. Consider how Mahuaa Media obtained a term loan of Rs 75 crore from Punjab National Bank through an application on December 15, 2009, for setting up of state-of-the-art digital studios in Noida and Kolkata at an estimated cost of Rs 304.77 crore.
The application, signed by promoter Anand Tewari, contained a 150-page project report prepared by SBI Caps. The report said the promoter would bring in his share of Rs 101.59 crore and the balance Rs 203.18 crore would be financed through long-term loans by a consortium of Punjab National Bank, Union Bank of India and Bank of Baroda.
The site for the digital studio in Noida had not been fixed and no provision was made for leasing of studio premises in Noida in the SBI Caps report. Investigators believe there are several other lacunae in the SBI Caps report.
At PNB, before sanctioning the loan, nobody bothered to visit the Mahuaa Media office, though the company was a new customer for the bank. PNB officials also did not bother to obtain a credit opinion from existing bankers of the company. "No independent verification of the suppliers or the prices of equipment to be financed by the bank was done by the branch," an internal report said.
"There were major lapses by SBI Caps... The SBI Caps team led by vice-president Shalini Srivastava had blindly relied on the names of suppliers and prices of equipment provided by the company without independent verifications," the report said. Further, processes in loan sanction were done violating PNB's own guidelines for such approvals.
On March 25, 2010, P K Tewari, a promoter of Mahuaa TV, submitted a lease deed for a studio in Noida, and claimed that the teleport had been installed. However, it has now emerged that this lease was forged. The original deed was to a sister company, and there was no permission to install a teleport.
Not just PNB, no officials from the other two banks which loaned money for the project — Union Bank of India and Bank of Baroda — bothered to visit the office or the proposed studio of Mahuaa TV in Noida.
However, officials from all three banks visited a Kolkata property of the company that was mortgaged. Senior PNB manager Basant Gupta, Union Bank of India official B K Alagh and Bank of Baroda senior manager O P Sambharia travelled to Kolkata. However, none of them bothered to visit the next door studio and company office in Noida.
Sambharia spent an hour in the Kolkata studio of Mahuaa and certified that equipment invoiced for Rs 100 crore had been installed. It was a single page sketchy report.
SJA Technical Consultants, a bank-approved valuer for plant and machinery, certified in a report in September 2010 that studios were functional and verified the installation of equipment as per invoices. The invoices later turned out to be forged. The consultants certified equipment installed in plot numbers 13, 14, and 17-B of Sector 16A of Noida, whereas the loan was for setting up of a studio just in plot number 14.
K D Shah of SJA Technical Consultants travelled on tickets bought by Mahuaa with one of its senior executives on September 27. Four days earlier, he had submitted his report, claiming to have visited Kolkata already.
Another professional, Rajendra Srivastava of Garg A Associates who was commissioned to value plant and machinery, admitted during investigations that he couldn't identify the equipment mentioned in the invoices due to lack of technical expertise.
Investigations have also thrown up similar omissions from panel advocates of the banks, their auditors and others involved in approving the loan.
Link times of India
Icra downgrades Jet Airways' loan-Business Standard
Jet Airways has total debt of about Rs 9,800 cr, in rupee and dollar denominations
Following delays in Jet Airways servicing its interest payments, credit rating agency Icra has downgraded the company’s loans from ‘BB’ to ‘D’ (default grade). The agency has brought the airline’s long-term and short-term loans and fund- and non-fund based limits amounting to Rs 7,460 crore under this rating.
Jet Airways has total debt of about Rs 9,800 crore, in rupee and dollar denominations. This includes about Rs 6,000 crore of aircraft-related loans, term loans and working capital. The Naresh Goyal-promoted airline continues to spend about Rs 1,000 crore on interest every year.
The carrier, co-owned by Etihad Airways, plans to raise a $150-million foreign loan (in addition to $150 million raised earlier this year) to refinance its high-cost debt. Owing to high operating costs, weak revenue growth, one-off maintenance expenses and an impairment charge, the airline reported a record loss of Rs 4,129 crore for FY14.
Losses have put pressure on the airline in repaying creditors. The airline’s auditors, Chaturvedi & Shah and Deloitte Haskins & Sells, said repayment of dues have been delayed by as many as 60 days. However, the airline has managed to clear the dues on balance sheet as of May-end, according to its annual report for FY14.
A senior public sector bank executive said it was no secret that the airline was facing stress, after reporting huge losses for FY14. Lenders, however, aren’t unduly worried about the rating downgrade, as rating agencies immediately downgrade an entity even if payments are delayed by a year. Banks are worried about the overall health of the airline sector, as memories of the Kingfisher Airlines crisis were still fresh, the bank executive said.
At Jet Airways’ annual general meeting earlier this month, chief financial officer Ravichandran Narayan told shareholders the company was rationalising operations, with a focus on international routes. The company has finalised a three year business plan to increase revenue and control costs. For the first quarter of FY15, the airline cut its loss to Rs 217 crore, primarily through increased fleet utilisation and improved yields.
“It is very disappointing that the recently published ICRA downgrade is based on a historic delay in debt servicing, which occurred and was resolved in the previous financial year. In fact, there were no outstanding default in the repayment of dues to the financial institutions and banks as at 31 March 2014. Jet Airways can confirm that the airline is current on all its loan obligations and interest payments. Our recently published first quarter results show a positive trend in performance and that the airline’s three-year business plan is on track. Airline representatives will meet the agency on Monday to set the record straight,” Jet said in a statement.
Jet Airways has total debt of about Rs 9,800 crore, in rupee and dollar denominations. This includes about Rs 6,000 crore of aircraft-related loans, term loans and working capital. The Naresh Goyal-promoted airline continues to spend about Rs 1,000 crore on interest every year.
The carrier, co-owned by Etihad Airways, plans to raise a $150-million foreign loan (in addition to $150 million raised earlier this year) to refinance its high-cost debt. Owing to high operating costs, weak revenue growth, one-off maintenance expenses and an impairment charge, the airline reported a record loss of Rs 4,129 crore for FY14.
Losses have put pressure on the airline in repaying creditors. The airline’s auditors, Chaturvedi & Shah and Deloitte Haskins & Sells, said repayment of dues have been delayed by as many as 60 days. However, the airline has managed to clear the dues on balance sheet as of May-end, according to its annual report for FY14.
A senior public sector bank executive said it was no secret that the airline was facing stress, after reporting huge losses for FY14. Lenders, however, aren’t unduly worried about the rating downgrade, as rating agencies immediately downgrade an entity even if payments are delayed by a year. Banks are worried about the overall health of the airline sector, as memories of the Kingfisher Airlines crisis were still fresh, the bank executive said.
At Jet Airways’ annual general meeting earlier this month, chief financial officer Ravichandran Narayan told shareholders the company was rationalising operations, with a focus on international routes. The company has finalised a three year business plan to increase revenue and control costs. For the first quarter of FY15, the airline cut its loss to Rs 217 crore, primarily through increased fleet utilisation and improved yields.
“It is very disappointing that the recently published ICRA downgrade is based on a historic delay in debt servicing, which occurred and was resolved in the previous financial year. In fact, there were no outstanding default in the repayment of dues to the financial institutions and banks as at 31 March 2014. Jet Airways can confirm that the airline is current on all its loan obligations and interest payments. Our recently published first quarter results show a positive trend in performance and that the airline’s three-year business plan is on track. Airline representatives will meet the agency on Monday to set the record straight,” Jet said in a statement.
Syndicate Bank scam: Criminality a major reason for current bad debt pile of lenders
A slowing economy and clearance delays for projects are the two commonly cited reasons for the spike in bad loans in the banking system, over the past few years in particular.
That’s something even the regulator hesitates to admit.
In the post monetary policy presser on 5 August, Reserve Bank of India (RBI) governor Raghuram Rajan cautioned against highlighting criminality as the reason for all bad loans ills of banking system.
“One should not extrapolate this (arrest of former syndicate Bank chairman S K Jain in bribe case by the Central Bureau of Investigation (CBI) to the entire public sector banking system and assume that all the problems in the public sector banking system are because of criminality rather than because of other factors,” Rajan told journalists to a question.
Rajan is correct in saying that “all the problems” are not because of criminality rather than other factors. But a look at the bad loan scenario would tell you, reasons for a sizeable chunk of bad loans can be indeed attributed to the element of criminality.
A lot will depend up on what defines criminality in a banking transaction. If the definition of criminality involves diversion of funds borrowed from banks to a non-stated purpose, with or without the knowledge of the banker, then it makes a perfect script for bad loans in many cases.
Similalrly, if a rich promoter is hesitant to pay back his banks even when he has the money, the promoter should well be treated as a criminal because he is fooling the banking system, which handle public money. A number of cases have happened in the past, where the promoter is a willful defaulter. In state Bank of India (SBI) alone, outstanding loan amount involving willful defaulters exceed Rs 10,000 crore.
In the past 3-4 years, the number of cases involving fund diversion by corporations from the stated purposes, cases of unlawful activities involving public sector bank officials and number of willful defaulters have significantly gone up, giving enough reasons to suspect that reasons for sharp rise in the pile of bad loans in the country’s Rs 86 lakh crore banking system has come through criminal conspiracy and not necessarily attributable to the much hyped twin reasons.
A look at some of the cases, where there are elements of fund diversions or willful default, points to characteristics of criminality in the conduct of the borrower.
Vijay Mallya-promoted Kingfisher Airlines defaulted Rs 6,500 crore of loans to a 17-bank consortium led by SBI. After some repayments, the due are currently about Rs 4,000 crore. Banks are in the process of declaring Kingfisher as a willful defaulter.
The CBI has registered a case against the airline in connection with the loan exposure. Banks argue that they have a good case to declare on account as a willful defaulter citing evidences for fund diversion and ability of the promoter to mobilise funds.
Similarly, in the case of Winsome Diamonds, the CBI have begun a probe to the working of the company after it allegedly defaulted Rs 6,500 crore worth of loans to a host of banks, making it equal in size to Kingfisher. While the company claims that the default has occurred following non-payment of dues by its trading partners in the Middle East.
But the banks haven’t bought that excuse and have slapped legal notices against the firm.
In another case, in 2013, the CBI had filed case against Deccan Chronicle Holdings Ltd (DCHL), for alleged cheating, fraud. According to some of the bankers to DCHL, part of the reason the company faced the crisis was diversions of funds to expansion plans of the group, which was not stated to the lenders at the time of taking the loan.
Also, there were lack of coordination among the banks in the consortium and Listed above are only a few prominent cases. The list is long.
The fate of the Rs40,000 crore loan to Bhushan Steel is currently uncertain in the backdrop of serious charges of bribery by the firm to bankers. Even though the loan is at present standard, bankers fear that any possible slippages in the loan can have huge impact on the banks in the consortium.
In November 2010, the CBI busted a corporate loan racket in Mumbai involving the former chief of LIC Housing Finance and several other officials of public sector banks, where investigators found that middlemen bribed bankers to facilitate loans to their corporate clients in violation of norms.
Indian banks are already reeling under the pain of stressed assets. The amount of bad debt of 40-listed banks in the country stood at Rs 2.5 lakh crore in the banking system as of end June.
Among the banks with high level of gross non-performing assets (NPAs) are United Bank of India (10.49 percent), Dhanlaxmi Bank (7.17 percent), Central Bank of India (6.15 percent), Andhra Bank (5.98 percent) and Indian Overseas Bank (5.84 percent).
Besides the bad loans, a huge chunk of loans are being restructured, which is estimated to be between Rs 5 lakh crore to Rs 6 lakh crore. A sizeable chunk of such loans could turn bad too in the absence of significant economic revival. Banking system is the backbone and a proxy to the economy, hence damages caused to it can have serious ramifications on the overall economic stability.
The fact is that criminality is a major reason for the current bad debt pile of Indian banks. The asset quality scenario could worsen if the regulators and the banks do not recognize the root causes of the bad loans of Indian banks.
The element of criminality in a banking transaction, whether it comes from any of the three parties involved in the transaction—the banker, the borrower or the mythical middleman— ultimately hits the banks, which are guardians of tax payers’ money.
The first task of the central bank is to have the courage to acknowledge the problem, see the larger picture and not ignore the recurring signals.
No comments:
Post a Comment