State Bank Lends Rs1,200 Crore to Patanjali to buy Ruchi Soya, Despite Zero recovery and Rs746 Crore Write Off
Updated on 22 July 2020 at 7.15pm to add response from SBI.
 
State Bank of India (SBI) response to a shareholder have unveiled strange banking practices which suggest a callous disregard for recovering bad debts. The beleaguered Ruchi Soya Industries, whose share prices are rampaging today is a prime example. 
 
In FY2019-20, SBI wrote off Rs746 crore of non-performing assets (NPA) of Ruchi Soya Industries and has not recovered a single rupee from the company. The plan approved under the Insolvency & Bankruptcy Code (IBC) had indicated that SBI would recover Rs883 crore against its admitted claim of Rs1,816 crore. Instead, it made a fresh loan of Rs Rs1,200 crore to Baba Ramdev-led Patanjali Ayurved to help it acquire the company. 
 
SBI was part of a consortium of banks that lent Rs3,200 crore to Patanjali Ayurved for its acquisition.  In fact, several banks led by SBI had made claims of over Rs12,146 crore against Ruchi Soya before the bankruptcy courts. SBI had the highest exposure of Rs1,800 crore, followed by Central Bank of India (Rs 816 crore), PNB (Rs 743 crore), Standard Chartered Bank India (Rs 608 crore) and DBS (Rs 243 crore). It would probably be safe to surmise that other public sector banks (PSBs) in the consortium have made similar write-offs.
 
The question is, why are public sector banks (PSBs) not smart enough to protect their interest by building in some upside while lending to the new borrower, who is expected to achieve a turnaround? Many private banks insist on converting loan to equity in such situations and gain from capital appreciation. In the case of Ruchi Soya, the share price has moved from about Rs3.50 to Rs1,535 a gain of 43,757.14% since Patanjali acquired the company.  
 
Documents shared by SBI to Vivek Velankar, president of Pune-based Sajag Nagrik Manch, and a shareholder of the bank, reveals that there is absolutely no recovery from Ruchi Soya till March 2020. 
 
 
Technically speaking, when debts are written off, they are removed as assets from the balance sheet because the bank does not expect to recover payment. This practice is frowned upon by experts but is routinely done by banks as part of their tax management clean-up process. The beneficiaries are invariably some of our biggest industrialist defaulters. 
 
 
In a regulatory filing in September 2019, Ruchi Soya had said that the National Company Law Tribunal (NCLT) has approved Patanjali's resolution plan of Rs4,350 crore. The order had stated that, Patanjali would “infuse the amount of Rs4,350 crore” in a SPV (special purpose vehicle) called Patanjali Consortium Adhigrah, which will be later amalgamated with Ruchi Soya. 
 
In an exchange filing, Ruchi Soya said the Patanjali group would infuse Rs204.75 crore as equity and Rs3,233.36 crore as debt. Another Rs900 crore will be brought through the subscription to non-convertible debentures and preference shares in the SPV. It would also provide a credit guarantee of nearly Rs11.89 crore.
 
In a reply to an application filed under Right to Information (RTI) Act, the Reserve Bank of India (RBI) had told applicant Saket Gokhale that Ruchi Soya Industries with a debt of Rs2,212 is one of the top 50 defaulters.
 
Patanjali Ayurved was supposed to have paid back Rs4,053.19 crore creditors under the resolution plan. So, either Patanjali Ayurved has repaid part money to creditors or renewed old loans of Ruchi Soya in its account books.
 
As Moneylife had mentioned, during the eight years from FY12-13 to FY19-20, SBI has 'technically/ prudentially written off’ a massive sum of Rs1.23 lakh crore from its books, but manged to recover only 7% or Rs8,969 crore in this period. This makes a mockery of the aggressive claims by a string of high-profile government spokesperson and economic advisors that a ‘technical’ write-off does not stop the recovery process. A former chairman of a PSB told Moneylife as a matter of fact that once a loan turns bad in India, it is almost impossible to recover anything because it has already been ever-greened for several years. (Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years! )
 
When Patanjali completed the acquisition, Ruchi Soya shares were hovering at around Rs3.50 per share on the BSE. Earlier on 24 July 2019, it hit its 52-week low of Rs3.28. From January this year, Ruchi Soya share price started moving up. In fact, on 18 May 2020, it hit a new high of Rs701.25, but slumped till 28th May 2020. After that it started reaching new highs and on 29 June 2020 recorded its 52-week high of Rs1535 per share on the BSE. 
 
 
On Thursday, Ruchi Soya closed 5% down at Rs898.15, while the 30-share Sensex ended the day 1.2% higher at 36,471.  
 
We emailed SBI asking for its clarification on the debt write off and recovery from Ruchi Soya or the company's new owners. We have asked...
1. What attempts SBI made to recover its written off loan of Rs700 crore from Ruchi Soya?
2. What efforts SBI had taken to recover the loan amount from Ruchi Soya through the NCLT proceedings?
3. Since Patanjali Ayurveda took over Ruchi Soya, who owns the responsibility of the Rs700 crore debt given by SBI to Ruchi Soya?
4. How SBI plans to recover its written off debt of Rs700 crore and from whom the amount would be recovered?
 
UPDATE:
However, SBI declined to comment on any of these questions. In an email, a spokesperson from SBI says, "It is the policy of the bank not to comment upon individual account and its treatment".
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    COMMENTS

    bala.shanbhag

    2 weeks ago

    I feel, there should be responsiblity while commenting. Ruchi Soya, there is recovery,
    I understand.

    beckhem18

    2 weeks ago

    Public banks are free money scheme for some political thugs. Baba's fund management is from next level.

    tillan2k

    3 weeks ago

    We have become land of sadhu thugs

    monish211

    3 weeks ago

    Another scam in the making. Sponsored by the ruling party. Its a shame.

    REPLY

    bala.shanbhag

    In Reply to monish211 2 weeks ago

    I understand, there is recovery in Ruchi Soya. Tell the correspondent to confirm.

    MDT

    In Reply to bala.shanbhag 2 weeks ago

    Thanks for your comment, Sir. This article is written based on information as shared by SBI with a shareholder. If SBI itself states there is no recovery (till March 2020), we need to accept it. In addition, we have sent emails to SBI top executives, but have not heard from them on this subject of written off debt of Ruchi Soya and recovery. Any idea, why SBI is keeping mum on this?

    Jose Koshy

    3 weeks ago

    Absolute Ponzi Scheme..Legally use NCLT to clean all Sins and ever green using the same Banks....Wah Kya Idea hai...All Paid by Tax Payers sweat ! Atmanirbhar ! Indeed

    hamungel

    3 weeks ago

    It was very simple to ask for equity for the written off Rs.746 crores. Why was this not done is perplexing.

    jvp0101

    3 weeks ago

    This thief is Feku’s benami partner.

    guptha2001

    3 weeks ago

    SBI has written off the debt from the Books, it has not waived off the debt. Unit is running and recovery is happening. Moneylife may need to better phrase the sentences. Thanks

    REPLY

    beckhem18

    In Reply to guptha2001 2 weeks ago

    How much recovered since last 8 years. At this rate govt will take next 50 Years to recover till last paisa.

    bala.shanbhag

    In Reply to beckhem18 2 weeks ago

    Sir, all loans are not covered by the securiteis. Hardly, there will be full recovery. It is the very nature of any loan. Even if one gives to one's friend! Banks give loan on loan documents, not fully secured as per the guidelines, like Housing loan. There may be about 5% NPA in any debts/loans. However, between 2004 to 2014 it crossed 12% due to reckless lending, where banks land in trouble.

    jvp0101

    In Reply to guptha2001 3 weeks ago

    Gupathaji, please stop lying like Feku Chaiwala. The readers are not cowdung eaters like Andha bhakts. Ha ha has.

    prime

    In Reply to guptha2001 3 weeks ago

    Ok, then if recovery is happening then why write off the debt?

    muditsrivstv

    In Reply to prime 3 weeks ago

    Loan write off doesn't mean that the bank will cease it's efforts to recover the funds. The article itself explains the meaning of write off an account.

    in4tunio

    3 weeks ago

    Another question about Ruchi Soya: how was equity reduction in the ratio 100:1 allowed without repricing the stock?

    yerramr

    3 weeks ago

    This is a classic case of behest lending and irresponsible too. When we request for helping revival of viable MSMEs in the State, it refuses to move despite Subordinate Debt offering by GoI in its Atma Nirbhar Bharat Abhiyan package for stressed assets. Even if they cherry pick the MSMEs for revival, with Rs.1200cr at least 10000 manufacturing micro and small enterprises can be revived!!

    s5rwav

    3 weeks ago

    Mr Shaktikanta Das the Incumbent Governor of RBI is Publicly Requested to Recover Lost Public Money from the Board of Directors of State Bank of India Headed by Mr RajnishKumar. I am Babubhai Vaghela from Ahmedabad on Whatsapp Number 9409475783. I am also Shareholder of State Bank of India. Thanks.

    harinishanth

    3 weeks ago

    1.2 lakh crore from 1 bank. If collectively all bank put together......so much of taxpayers money is wasted.. We would be a trillion dollar economy long before had there been strong governance. Can Modiji do anything to protect his people?

    REPLY

    kalpakjoshi666

    In Reply to harinishanth 3 weeks ago

    Simple answer, haha NO.
    He might have done something probably initially, if he was so careful for the concerned matter.

    veera.kumar1960

    In Reply to harinishanth 3 weeks ago

    Modi government has to set right this trend otherwise private business houses will plunder more and more tax payers money and this country will be bankrupt like our terrorist neighbors Pakistan.

    prime

    In Reply to veera.kumar1960 3 weeks ago

    The rot is not just private borrowers. It is as much the elected representatives, and then the bank employees.

    bala.mathur

    3 weeks ago

    Why am I not surprised? Because it has happened so many times before. And it will continue to happen. That, my friends, is Vikas..

    sudhanva

    3 weeks ago

    Take a deep breath and relax.

    REPLY

    vkparam29

    In Reply to sudhanva 3 weeks ago

    Baba is new poster boy of present regime. He will get finance for dead horse also. No wonder. Take deep breath and relax

    kumarindiacool

    In Reply to vkparam29 3 weeks ago

    true

    SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!
    While the banking regulator and the Union government have been busy clarifying that bad loans written off does not mean a waiver, documents procured by Vivek Velankar from State Bank of India (SBI) reveal minuscule recovery of these bad debts. Information received by Mr Velankar shows that as against a write off of Rs1,23,432 crore, SBI has recovered just over 7% or Rs8,969 crore over the past eight financial years.
     
    Mr Velankar, president of Pune-based Sajag Nagrik Manch, says, "I tried obtaining this information under Right to Information (RTI) Act, but SBI denied it claiming that collating this information would be a waste of its resources. Being a shareholder of SBI, I then asked for this information as question for the annual general meeting (AGM). I did not get a chance to ask my question during the AGM, but the bank shared this information, which is quite shocking. This also exposes how the bank writes off loans of 100s of crores of rupees of large defaulters while denying waiver of simple interest on loans for common customers."
     
    The Bank’s reply to Mr Velankar shows that during the eight years from FY12-13 to FY19-20, SBI has 'technically/prudentially written off’ a massive sum of Rs1.23 lakh crore from its books, but manged to recover only 7% or Rs8,969 crore in this period. This makes a mockery of the aggressive claims by a string of high profile government spokesperson and economic advisors that a ‘technical’ write-off does not stop the recovery process. The fact is that once a loan turns bad in India, it is almost impossible to recover anything because it has already been ever-greened for several years, said a former bank chairman to Moneylife.
     
    (Source: SBI)
     
    Technically speaking, when debts are written off, they are removed as assets from the balance sheet because the bank does not expect to recover payment. This practice is frowned upon by experts but is routinely done by banks as part of their tax management clean up process. The beneficiaries are invariably some of our biggest industrialist defaulters. 
     
    In contrast, when a bad debt is written down, some of the bad debt value remains as an asset because the bank expects to recover it. However, as SBI has shown, most of the times, there is no recovery or negligible recovery for the amounts written off. 
     
    As per the data provided by SBI to Mr Velankar, Bhushan Power & Steel Ltd, IRVCL Ltd and Videocon Industries Ltd are its biggest defaulters, and had not re-paid a single penny. Alok Industries Ltd is the biggest borrower in this list with a written off loan of Rs8,098.05 but has repaid Rs1,703.57 crore to SBI. 
     
    Here is the list of loan portfolios worth Rs500 crore and above that were written off by SBI.
     
     
    Earlier in April, the Reserve Bank of India (RBI) had said that Indian banks have technically written off a staggering amount of Rs68,607 crore due from 50 top wilful defaulters, including absconding diamantaire Mehul Choksi. RBI had revealed this information in reply to an RTI filed by Saket Gokhale.
     
    RBI said that this amount (Rs68,607 crore) comprising outstanding and the amounts technically or prudentially written off till 30 September 2019. 
     
    Topping that list of top-50 defaulters to Indian banks, was Mr Choksi's scam-hit company, Gitanjali Gems Ltd, which owed Rs5,492 crore, besides other group companies, Gili India Ltd and Nakshatra Brands Ltd, which had taken loans of Rs1,447 crore and Rs1,109 crore, respectively.
     
    Mr Choksi is currently a citizen of Antigua & Barbados Isles, while his nephew and another absconder diamond trader Nirav Modi is in London.
     
    The second in the list is REI Agro Ltd, with an amount of Rs4,314 crore, and its directors Sandip Jhujhunwala and Sanjay Jhunjhunwala who are already under the scanner of the Enforcement Directorate (ED) since over a year.
     
    The next on the list in the Rs4,000-crore bracket is absconding diamantaire Jatin Mehta's Winsome Diamonds & Jewellery owing Rs4,076 crore and which is being probed by the Central Bureau of Investigation for various bank frands.
     
    In the Rs2,000-crore category, there is the Kanpur-based writing instruments giant, Rotomac Global Pvt Ltd, part of the famed Kothari group, which owed Rs2,850 crore.
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    COMMENTS

    gopaliyer1950

    2 weeks ago

    1.On SBI recovery rate , only redeeming feature is that last 2 years. recovery rate is around 10 %. 2 .It is a fact that banks efforlessly write off large lians, but would not waive even interest for genuine small borrowers. 3.List of defaulters include Reliance communications.I suppose part of Ambani group !

    bala.shanbhag

    3 weeks ago

    Sir, it does not mean amount is 'written off' and borrower need not pay ! As per the Prudential Norms, Provision is made for these amount out of the profit of the Bank. These cases are either under court, or under recovery process. If the provision is not made as per 'norms', Bank is simply showing higher NPA on the asset side and reserve on liability side. Higher percentage of NPA gives wrong picture of the Bank. Hence, it can not be construed as 'Written off', or borrowers need not pay !Eg. In case of Nirav Modi, Vijay Mallaya's cases, banker can not simply show NPA till recovery will make prudential write off, as recovery takes time. It does not mean, they are let off. New lawas like : Fugative Offenders Act... etc.. take time to adjust the amount even if the amount is recovered. Which may please be noted.

    tillan2k

    3 weeks ago

    ahhahaah SBI Sickening Bank of India

    mohd_aslam_ansari

    3 weeks ago

    I wonder why the properties/assets of defaulters are not being attached. Include properties of the concerned bank officials too for recovery. What about the guarantees or mortgages provided for obtaining such huge loans? And how these entities are still running their businesses?

    REPLY

    tillan2k

    In Reply to mohd_aslam_ansari 3 weeks ago

    They have partners and patrons at high places

    ramchandra.karve

    3 weeks ago

    The Willful Loan Defaulters such as Mallya, Nirav Modi, Mehul Choksi and others deserve to be stripped at Public Places and flogged all over their bodies with Red Hot Iron Rods. They should not be extended Public Health Facilities, supply of electricity and water to their premises should be discontinued by the Government . Ramchandra Karve

    jjain782

    3 weeks ago

    I understand nobody can touch cheats Nexus between criminals and bank officials has to be broken Crime can be committed only with the help of bank officers, they must be punished first
    There should be at least 100 Sucheta Dalalas to wake up the authorities all the best

    umeshs62

    3 weeks ago

    Cheating is in our blood. It has become part of our culture. PSU officials are hand in glove with scamsters. Give a loan of few hundred crores to a scamster, take a cut of few crores and you are set for life. Scamster needs courage to grease a few palms, borrow and disappear. If he is dragged to court then the same process will be followed.

    REPLY

    rs235m

    In Reply to umeshs62 3 weeks ago

    Court case will go on for 10 years and many officials will be transferred or will retire on this time.Only few unlucky scamsters like L P yadav go to jail.That too government does not recover the scam money.

    tillan2k

    3 weeks ago

    If it was not owned by GOI and bankrolled by tax payers SBI long ago would have become SICK Bank of India

    prime

    3 weeks ago

    SBI's market carp is 1.67 lakh crore. So this writeoff is about 75% of its market capitalization. Any other company would have gone bankrupt long back. But we still plod along with SBI and PSU banks instead of putting the bankers and defaulters in jail.

    Let's remember that for every Singal, Jivrajka, Dhoot, Choksi, Modi, Jhunjunwala, Mehta, there is at least one politician and 5 bankers guilty.

    hamungel

    3 weeks ago

    Surprising to see Ruchi Soya's Rs.746 crore write off. Why couldn't SBI get shares worth this amount?

    rs235m

    3 weeks ago

    Is SBI a Dharamsala for giving donations to rich people by robbing the middle class taxpayer and also senior citizens who solely survive on the bank interest. Part of the written of amount might have gone to political parties ,Babus , bank executives who are in connivance with suit boot industrialists.It is a joint" loot and share "program.

    mahesh.bhatt

    3 weeks ago

    Welcome to Babugiri Liberalised India Aam Aadmi banking services charged in pennies 1 Re pens tied downs 7% loan recoveries done all automated processes Manager's undercuts above in all transactions of loan approvals Global mess in India Royally RBI dossiers? Mahesh Bhatt

    ganeshchopade09

    3 weeks ago

    7 Lakh Crore Bad Loans Written Off In Decade, 80% Of It In Last 5 Yrs ( This doesn't include FY2020 Figure). In last 8 year country's largest lender SBI manage to recover mere 8969 Crore against 1.23 Lakh crore written off!!

    mywopy

    3 weeks ago

    That sum what got wasted away at SBI is more than 3% of our nations annual budget.

    Like someone addressed these psu bankers a while ago, a group of heartless bankers.

    They should be asked to quit their jobs in shame for failing the trust of this great nation and its people.

    REPLY

    richard

    In Reply to mywopy 3 weeks ago

    Thanks for your comment. It had a deep insight with the reasons for the NPA. There is also another serious one and that is corruption with the connivance of the Bankers. They granted these loans by taking kickbacks.

    dn.prakash

    3 weeks ago

    Before reforms came in 1991, Banks were taking collateral securities/personal guarantee of Directors. After the reforms, along with economic growth, demand for credit was huge and competition among banks started leading to agressive lending. The Banks also started marketing of products(at the advise of consulting firms). Credit Department were given huge targets leading to the top executives chasing the corporate borrowers so that targets are met faster. Banks forgot secuirty and guarantee aspects in their greed for business. Crony capitalists found this opportunity and took in principle sanction from one lead bank and showing that letter they started bargaining with other banks. Top executives who want to reach targets became guinea pigs for these corporates. Somewhere during 2001-2008, RBI permitted Corporates to borrow short term loans (less than a year) beyond the consortium in the name of excess liquidity in the system. This helped these corporates to avail short term loans to pay overdues and keep the account out of NPA at the cost of Banks themselves. It went to such an extent, Banks have lent against brand value (imaginary sums) and all today's major defaulters got benefit of this. Today when the music stopped, banks are holding assets in books which have hardly any value. No surprise banks recovering only 10% to 20% of loans.

    REPLY

    richard

    In Reply to dn.prakash 3 weeks ago

    Thanks for your comment. It had a deep insight with the reasons for the NPA. There is also another serious one and that is corruption with the connivance of the Bankers. They granted these loans by taking kickbacks.

    PMC Bank Crisis: RBI Trying To Find Workable Solution, Says Governor Das
    The Reserve Bank of India (RBI) is trying to find a workable solution in the Punjab and Maharashtra Cooperative (PMC) Bank matter as losses in the bank are very high and have eroded deposits by more than 50%, says RBI governor Shaktikanta Das. However, it has been almost 10 months since RBI has been trying to find out a workable solution in the PMC Bank crisis. 
     
    Speaking at the 7th Banking and Economic Conclave organised by State Bank of India, Mr Das, says, "With regard to the PMC Bank, the Reserve Bank is engaged with all stakeholders to find out a workable solution, as losses are very high, eroding deposits by more than 50%."
     
    Last month, while enhancing withdrawal limit to Rs1 lakh for PMC Bank customers, the central bank had said that more than 84% of the depositors of the Bank will be able to withdraw their entire account balance.
     
    Overall, this was the fifth time the central bank has increased the withdrawal limit after imposing the regulatory restrictions last year under the provisions of the Banking Regulation Act.
     
    According to a statement, RBI has been engaging with the stakeholders to explore the possibility of a resolution of the Bank. 
     
    "However, the process has been affected due to the lockdown on account of corona virus (COVID19) and the continuing uncertainty around the pandemic. Further, the extent of the negative net worth of the bank, and the legal processes involved in recovery of bad debts also pose challenges or limitations in resolution of the bank."
     
    "Nevertheless, consultation with various stake-holders and authorities for resolution of the bank is continuing. It is, therefore, considered necessary to extend the aforesaid Directions for a further period of six months to take the process forward," RBI had said last month.
     
    The PMC Bank scam broke after Housing Development and Infrastructure Ltd (HDIL), a single borrower which accounted for 73% of PMC's loan book, went bankrupt. 
     
    HDIL, in collusion with PMC Bank executives, created thousands of fake customer accounts to re-route funds to itself.
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    COMMENTS

    specsypies

    3 weeks ago

    That Unauthorized sites Website should be work as https://www.specsypieslive.com
    Why they don't know about simple posting?

    specsypies

    3 weeks ago

    That Website should be work as specsypieslive.com

    anujaarora007

    3 weeks ago

    Its a long wait, by saying that deposits are being eroded one is sending out panic messages to the clients of PMC Bank. These days everything that goes wrong is being blamed on the Pandemic but our comatose RBI officials are forgetting that the people are suffering since last September when there was no hint even of the dreaded Coronavirus. Another six months will perhaps go by with just the same news and still nothing concrete is being done.

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