Money & Banking
Rs2500 crore bank fraud: CVC examining case against 24 officials

A Mumbai-based construction company has been reportedly sanctioned credit facilities under regular consortium--Rs2,510 crore--and as China Project consortium -- Rs410 crore-- with 26 banks, with PNB as lead bank

 
New Delhi: The Central Vigilance Commission is examining a reference received from Punjab National bank involving 24 of its officials in an alleged fraud involving over Rs2,500 crore, reports PTI.
 
The Central Bureau of Investigation (CBI) had on 25th April last year registered a case against Directors of a Mumbai-based construction company and others for their alleged involvement in cheating Punjab National Bank (PNB) and causing losses worth several crores.
 
According to information given by Minister of State for Finance Namo Narain Meena in the Rajya Sabha today, the company has been reportedly sanctioned credit facilities under regular consortium--Rs2,510 crore--and as China Project consortium -- Rs410 crore-- with 26 banks, with PNB as lead bank.
 
"It has been further informed by the CVC that PNB had made reference in September 2012 involving 24 officials, which is under examination in CVC," Meena said.
 
The exposure of loan on the company in all consortium banks is Rs2,529.62 crore as on 31 March 2011, the Minister said.
 
Of these, a highest of Rs409.97 crore is by PNB, followed by Rs309.51 crore by UCO bank, Rs216.64 crore by United Bank of India, Rs176.72 crore by Union Bank of India, Rs129.77 crore by State Bank of Bikaner and Jaipur, Rs102.82 crore by Indian Bank and Rs102.45 crore by Central Bank of India among others.
 
"Reserve Bank of India (RBI) had reported that the consortium banks had lodged claims with Export Credit Guarantee Corporation of India (ECGC) for the invoked guarantees. ECGC on 7 October 2011 had expressed their inability to consider the claim. The case has been again represented on 23 November 2011.
 
"A recovery suit before Debt Recovery Tribunal (DRT) was filed on 5 November 2011. The members of the consortium have also initiated recovery proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002," the Minister said.
 
In order to make third parties and professionals accountable, who have played a vital role in credit sanction or disbursement or facilitated the perpetration of frauds, Meena said that banks have been advised to report to Indian Banks' Association (IBA).
 
"IBA in turn will prepare caution lists of such parties for circulation among the banks," he said.
 

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StanChart India gets CCI approval for buying Barclays' assets

Standard Chartered Bank had approached the Competition Commission regarding its proposed acquisition of certain loan portfolios of Barclays in India

 
New Delhi: Fair trade regulator Competition Commission of India (CCI) has approved Standard Chartered Bank's proposed buyout of certain loan assets of Barclays, saying the deal would not adversely impact competition, reports PTI.
 
Standard Chartered Bank, India had approached the Competition Commission regarding its proposed acquisition of certain loan portfolios of Barclays.
 
The entity is to buyout the "performing loan portfolios of personal instalment loans, loans against property and home loan finance of Barclays Bank Plc, India branch and the performing loan portfolios of personal instalment loans and loans against property of Barclays Investments and Loans (India) Ltd (BILIL)".
 
Approving the proposal, the Commission in its order dated 21st November, said it is of the opinion that "the proposed combination is not likely to have an appreciable adverse effect on competition in India".
 
Besides, Standard Chartered Bank, Barclays India and BILIL, there are a large number of other players engaged in the business of providing personal loans, inlcuding personal instalment loans, loan against property and home loan finance, the Commission said.
 
"In view of the foregoing, it is observed that the proposed combination is not likely to raise any adverse competition concern," it said.
 
For the deal, Standard Chartered Bank has entered into separate framework deeds with Barclays India and BILIL.
 
The notice, seeking approval, was submitted to the Commission on 5th November.
 
As per the notice, Barclays India is exiting the line of business pertaining to personal instalment loans, loans against property and home loan finance while BILIL is existing operations related to personal instalment loans and loans against property.
 

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12.6% of total bank debt is with top 10 Indian corporate groups

Unless a solution to the problems of the heavily leveraged sectors and corporates is found, it is very unlikely that the economy will move ahead, says Espirito Santo Securities

 
Over the last five years (FY07-FY12) the debt of the top 10 debt-laden Indian conglomerates has increased at a CAGR (compounded annual growth rate) of more than 40%. This led to significant concentration of the banking system debt with the top 10 Indian groups accounting for nearly 12.6% of the total banking system debt.
 
Figure 1                       Debt as a % of total banking system advances
Figure 1 shows the group debt as a percentage of the total banking system advances of the top 10 corporate groups. This analysis is based on a report by Espirito Santo Securities. The Anil Ambani group (ADAG), Essar and Vedanta groups account for the top 6.4% of the total banking system advances. This is followed by Adani and Jaiprakash groups.
 
Of the groups deeply in debt, most, if not all have large interests in the infrastructure space with some of them being pure play infrastructure companies such as ADAG, Adani, GMR, Lanco and GVK. Others such as Vedanta and JSW invest mainly in metals and mining along with having interests in power generation.
 
It does not come as a surprise that it is these specific sectors, infrastructure, in particular, which are facing problems. According to Espirito Santo, understanding the fate of these large corporates and the sector specific issues can give us a glimpse of the asset quality problems.
 
Espirito Santo adds “Unless a solution to the problems of these heavily leveraged sectors and corporates is found, it is very unlikely that the economy will move ahead.”
 
As can be seen in the above graphs, the balance sheets and P&Ls for these groups are significantly stretched, as is clearly visible from the low interest coverage ratio which is hovering precariously close to the 1x, and the high leverage of the balance sheet at more than three for nearly six of the top 10 groups. 
 

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