Regulations
Moneylife Foundation requests RBI to investigate frequent debt restructuring of Lanco

Moneylife Foundation, in a letter to RBI governor, has requested Dr Rajan to investigate frequent debt restructuring of Lanco group and role played by L Rajagopal, the suspended Congress MP from Vijaywada

Moneylife Foundation has sent a representation to Dr Raghuram Rajan, governor of Reserve Bank of India, requesting him to investigate about role played by L Rajagopal, the suspended member of Parliament (MP) from Vijaywada and frequent debt restructuring of his Lanco group.
 

"As savers, we want to question the growing cost of banking services to us, because people like Mr Rajagopal are recipients of reckless lending and frequent restructuring.  Sir, this man, who called parliamentarians a 'mob' in an interview to Rajdeep Sardesai of CNN-IBN; who as an MP does not seem to understand the sanctity of the august house, has been considered fit to be extended fit to get a Rs9,000 crore reprieve from out nationalised banks. We believe that the RBI is ultimately accountable for such excesses by nationalised banks at the cost of the people of India," the representation reads.
 

The representation says, "Moneylife Foundation requests you to order an investigation into the corporate debt restructuring (CDR) and to make public all the documents pertaining to the CDR of Rs9,000 crore and the basis on which banks colluded to offer this reprieve to Mr Lagadapati Rajagopal. Why is the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (SARFAESI Act) not invoked against Lanco?"
 

The Lanco CDR is not an isolated case. Earlier in March 2012, several eminent social activists including Aruna Roy, Nikhil Dey, EAS Sarma, Prashant Bhusan, Jayati Ghosh, and others urged the UPA government to change the management and liquidate personal assets of Kingfisher Airlines chairman Vijay Mallya, also Rajya Sabha MP, to save the carrier.  (Don’t change aviation policy for Kingfisher Airlines, urge activists)
 

Coming back to Lanco, as reported last week by Moneylife, Lanco, which is in the debt restructuring process, has also been frequently involved in a number of controversies.

"(Lanco's) key businesses have been frequently involved in a number of controversies. In 2007, (its) managing director GV Babu was caught at an airport with a suitcase containing Rs34 lakh in unaccounted cash. Repeatedly tarnished by charges of corrupt practices and contract irregularities, Lanco Infratech Ltd ran into financial trouble and has filed for Corporate Debt restructuring (CDR) in July 2013," Wikipedia says.
 

Nomura had kept its rating and valuation (target price) on Lanco 'suspended' as it says the company is in the process of restructuring the debt on its standalone balance sheet, by way of reference to the CDR Cell.
 

"Group net debt-to-equity, including working capital loans of power SPVs and Griffin Coal acquisition debt, stood at12.7x as of December 2013 compared with 10.7x as of September 2013. Receivables from state discoms stood at Rs2,770 crore as of December 2013 compared with Rs2,940 crore as on September 2013, as impasse on tariff-related issues continued; the decline in receivables was largely on the back of recovery of Rs160 crore from Uttar Pradesh," Nomura said.
 

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COMMENTS

Yerram Raju Behara

3 years ago

I join Moneylife Foundation in speeding up the investigation not just of Lanco but of many other India Inc accounts indulged in by ICICI Bank, SBI, SBH, Canara Bank, IOB, Indian Bank, OBC, PNB in particular as the debt restructuring by these banks alone seem to account for as high as over 50% of the total CDR.

SuchindranathAiyerS

3 years ago

This is applicable to all of Bharath Sarkar and Bharath Sarkar ki Sampathi. It is the new order. The nouveau "Cursed Aristos" provoking another 1789.

AV Bagur

3 years ago

The stand taken by moneylife-foundation is commendable. Now we also need to focus on the misuse of SARFAESI Act by some unscrupulous bankers in conjunction with some property sharks and money lenders.

Bhaskar

3 years ago

AAP brand of politics has relevance when you look at crony capitalism. His methods may need change. PSB's need to revisit their NPA management and top management need to be held accountable. Quite often that is not the case due to the inherent decision making process in the disbursement of large advances. Are we becoming like Russia ruled by money mafia

MG Warrier

3 years ago

Concluding his speech at BANCON 2013, RBI Deputy Governor K C Chakrabarty had observed that the CDR Mechanism has been grossly mis-utilised and needs a thorough ovrthaul including setting up of an independent oversight body for approval of proposals as well as for monitoring regulatory guidelines on restructuring and technical write-off should be reviewed and these measures should be phased out for ensuring a stronger credit administration and recovery environment. RBI Governor Dr Rajan too has strong views against using CDR for accomodating healthy industrialists who cause huge NPAs in banks with which they deal. Efforts like the present one by Moneylife to protect public interest needs to be appreciated.

REPLY

Yerram Raju Behara

In Reply to MG Warrier 3 years ago

The right thing to ask is what the RBI is doing all these years? All major debt restructuring proposals some before and some after would be in the various periodical returns submitted to the RBI? Suddenly how come KC Chakraborthy woke up from slumber that too in a public congregation, when he had all the authority to seek the information necessary and also initiate appropriate action if the regulator found inappropriate decisions on this account from the primary lenders? The Regulator like the Judges is not accountable for inaction.

MG Warrier

In Reply to Yerram Raju Behara 3 years ago

I do share the concerns expressed here. Without elaborating I would like to mention here that there are HR-related issues like quality of manpower at all levels haunting regulators, judiciary and the public sector in general. Slowly, some awareness about the constituency which is ensuring such a state of affairs is dawning.

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