VIJAY MALLYA TO NIRAV MODI: WAS NATIONALISATION OF BANKS RIGHT?
In a moment of deep introspection, Duryodhana, the eldest of the Kauravas, in the battle of Hastinapura in Mahaabhaaratha, remarked. “I know what is right, but I cannot act upon it. I know what is wrong but I cannot get away from it. Helplessly I do things as dictated as if, by some power”.
On July 19, 1969, was Mrs. Indira Gandhi the then Prime Minister of India, a victim of such a confused state of mind? On this day she recommended to the Acting President of India and the Acting President Mr. Varahagiri Venkata Giri signed an Ordinance to nationalize 14 privately owned commercial banks, which had more than Rs. 50 crores in deposit, estimated to have controlled some 70% of the deposits in the country. When the ordinance was signed, Mr. Varahagiri Venkata Giri was the acting president. Dr. Zakir Hussain had died while in office on 3rd May 1969. Until then State Bank of India was the only Indian bank not privately owned.
In the context of developing India, this measure of taking over the ownership of 14 privately owned banks, by the government, was a monumental economic measure. Three reasons were advanced for the nationalization of these 14 private banks. A report in the Economic Times had pointed out that there were some 361 private banks which had ‘failed’ across the country during 1947 to 1955 period. This resulted in depositors losing all their money since banks did not offer any guarantee. Clearly there were no controls governing the operation of these banks. Secondly these privately owned commercial banks were mostly catering to large business and industrial houses and had mostly ignored agriculture and other priority sector constituting small industries, small traders and small entrepreneurs. Thirdly, these private banks were in town and cities only. They did not open branches in rural areas. Government of the day wanted to open bank branches even in backward areas. However what is important to note here is the demand by a vocal socialist section within Congress which also wanted these banks to be taken over by the government for their obvious failure. Thus it was the internal crisis within the Congress party that really led to the bank nationalization. It helped the pro-poor image of Mrs Indira Gandhi and helped her enormously at the elections that followed.
The first bank nationalization in India was in 1955. East India company had established –The Bank of Bengal in 1809, The Bank of Bombay in 1840 and – The Bank of Madras in 1843. All these 3 banks were amalgamated in 1921 and named as Imperial Bank of India, which, on becoming politically free, India nationalized it in 1955 to become the State Bank of India.
“Two grabbing hands” observed Mr. Sharu Rangnekar, an eminent management expert, “are all that the private enterprise could present before the people. There is a crisis of image in this sector”, while talking on “A philosophy without face”. But justifying the existence of private enterprise, A.D Shroff, founder president of the Forum of Free Enterprise remarked on record, “free enterprise was born with man and shall survive as long as man survives”. Between these two contrasting observations it is necessary to recognize that ever since the dawn of civilization, ever since the cave man became enterprising in his relentless pursuit of aggrandizing wealth at the cost of any and everything, that the interest of the individual and that of society were found to be at cross roads. Obviously, the capitalist slogan of Eugen Black, the first President of IMF, that “people must come to accept private enterprise not as a necessary evil, but as an affirmative good” failed to click. Years that went by saw private enterprise failing to keep alive the feeling that it was socially conscious. Much of the hopes and promise that was reposed in it receded gradually and faded into nothingness. It conveniently forgot its social responsibilities and failed to make meaningful contribution to the public good.
No wonder, propped by the public sentiments and electoral compulsion Mrs Gandhi decided and acted upon nationalizing the banks which, despite possibilities of being helpful to poor and under privileged, did hardly anything to promote banking, encouraging saving, or extending credit. Indeed banks in India before 1969, had done precious nothing to empower a large section of Indians. But fact of the matter is private enterprise is far more efficient, far more cost conscious and therefore more productive and obviously better managed. So, it was a clash between private enrichment and a perception of public good that led to nationalization of banks in India. Thus babus in the Ministry of Finance at Centre became the mai/baap for those banks.
In Karnataka, politicians of the ruling party, used the nationalization to promote their political agenda of bringing bank to everybody. Among them Loan Mela of Janardhan Poojari, the then Minister of State for Finance is the most important.
While it is true that people like Janardhan Poojari, have made it easier for poor people of Karnataka to enter the bank premises, he also unwittingly introduced a culture of NRPL, Non Repayment of Loan, leading to NPAs.
For those who are not aware of Loan Melas, an explanation is needed. It happened only in Karnataka, as Janrdhan Poojari is from coastal city of Mangalooru in Karnataka. Political workers allegedly of Congress party, would distribute loan application forms duly stamped for the purpose of identification by the bank officials. These forms, according to unconfirmed information, were sold for Rs.500/- to the favourites of those political workers. Those who got the form would go to the bank and bank officials would fill the form and upon signature disburse Rs.5000/- to Rs.25000/- to each applicant as loan. There are allegations that these applicants, after receiving the loan amount may have shared the amount with the political worker who gave the form, and the applicant was advised not to repay the loan. Hence NPA was started in a big way by this one innocuous act of Janardhan Poojari and Company. Reportedly it had run into hundreds of crores of rupees.
Thus for the first time political interference was introduced into banking in India. And over the years this interference has only increased. Appointment of General Manager and above like Executive Directors, Managing Directors and Chairmen were with appropriate political connections. There are allegations that huge money even changed hands to confirm these senior appointments to Boards of these public sector banks.
Naturally who have been appointed due to political connections ended up obliging politicians and bureaucrats in disbursing loans, and loans ended up, after intervals of window dressing, into the ballooning Non Performing Assets.
As we all know, in banking sector, there are both public and private sector players. Public sectors are government owned and private sectors are owned by individual share holders including their promoters. However, at present even public sector banks have gone partly private due to the sale of shares by government and also by fresh share offerings to general public. But majority shares have always remained with government.
Here it is important to note that bad loans or NPAs are comparatively more in public sector banks as compared to private sector banks. It is because accountability in private sector banks are far more stringent as compared to public sector banks. Beside the ‘chalta hai’ attitude of its personnel from top to bottom, they also succumb to offer of pay offs to look the other way, when things are not as per banking norms. Same may not be the case with private sector banks, with more stringent due diligence expected from its personnel at all levels. Of course, corruption is not only confined to public sector enterprises including banks, even private sector banks too are victims of this malaise. But being privately owned and controls and regulatory mechanisms of checks and balances are continuously present, any wrong move or misdeed is detected much earlier and faster. But since profit motive is the driving force, considerations of societal good is not a priority in private enterprise. But in public sector banks the social objective of empowerment of general public and service orientation is primary consideration while profitability is also a consideration. Thus their lending policies, credit practices are more inclusive. But in reality bank managers in public sector banks have been known to be difficult to smaller business demanding all kinds of requirements in terms of documentation, securities, sureties etc. while granting loans. And similar difficult unyielding positions are given a go-by when it comes to better off customers. A report datelined Chennai, “Madras HC slams banks for having different yardsticks to grant loans to affluent and poor” said it all.
That is how Vijay Mallyas and Nirav Modis have emerged. They have managed to keep everybody happy since they were happy too. In the process, it is the public money, the tax payers’ hard earned money, that is being allowed to loot and loot interminably. If Vijay Mallya was allowed to flee with some Rs.9000 crore of defaulted loan, comes the story of another big time looter Nirav Modi with some Rs.11500 crores having bolted before the door could be bolted. Reportedly Nirav Modi & his uncle Mehul Chokshi have used letters of undertaking very freely with the active connivance of PNB staff. And those two are not the only defaulters. There are thousands of them, and defaulted loans running into lacs of crores of rupees. While nationalization did not serve the purpose of garibhee hatao, empowering small traders and agriculture, it certainly helped the likes of Mallya & Nirav and thousand others to enrich themselves. Thus the question is whether nationalization was right after all! These Vijay Mallyas or Nirav Modis could not have managed to flee the way they did with PSBs, if it was HDFC or ICICI or at least the scale of cheating couldn’t have been so high with their fake documentation. In private sector surely several heads would have rolled, as a consequence.
Here it is very interesting to note that almost five years ago, reportedly an independent director of Allahabad Bank, Dinesh Dubey, had raised and recorded an objection to a management/government push for loans given to Gitanjali Gems of Nirav Modi/Mehul Chokshi (See Box). At that time the present CMD of PNB Sunil Mehta had served earlier as ED of Allahabad Bank. Curiously, the former CMD of PNB who served PNB, a 5 years term from 2009/2014, was formerly the CMD of Allahabad Bank. These are questionable revelations leading to unavoidable conclusions. This has led to political mudslinging between the ruling and opposition parties accusing each other as mother and father of these scams.
While we are about it, it is very pertinent to know that India’s bad loan problem ranks among the world’s worst. In fact we are the 5th after Greece, Italy, Portugal and Ireland. We are followed by Russia, Rumania, UAE, Hungary and Spain to complete the top ten in the race among 39 major world economies infested with bad loans, so informs a report by Care Ratings.
So, is privatization and a strong regulatory control on the entire banking sector is the only remedy? Reportedly FICCI (Federation of Indian Chamber of Commerce & Industry) has demanded privatizing of public sector banks. According to them “Recapitalization in the last 11 years has had limited impact in improving the health of public sector banks. These banks which constitute almost 70% of Indian banking are saddled with burgeoning stressed assets”.
Yes, privatization may or may not be the solution under the circumstances. The question is, all those who are responsible for this mess in the banking sector should be made strictly accountable with stringent action for complicity, including imprisonment. After all, banking industry thrives on depositors’ money. Banking works on trust and credibility. Those who play with the trust of general public must pay for it with compound interest with both physical and pecuniary suffering. Only then may be some semblance of probity in the Indian banking sector could be restored.
India’s Bad Loans: the list of 12 big defaulters
According to the RBI, just 12 companies are estimated to account for 25% of the gross NPAs, and were identified for immediate bankruptcy proceedings.
Bhushan Steel Ltd: Bhushan Steel, the largest manufacturer of auto-grade steel in India, has a loan default of Rs 44,478 crore. The State Bank of India (SBI), the lead bank of the consortium of lenders, had moved the NCLT for recovery of its loan. The NCLT has reserved its order on the plea.
Lanco Infratech Ltd: Lanco Infratech, once listed among fastest growing in the world, has a loan default of Rs 44,364 crore. IDBI has already initiated the process under the Insolvency and Bankruptcy Code against company’s loan defaults.
Essar Steel Ltd: Essar Ltd, one of the biggest in India and abroad in the steel sector, has a loan default of Rs 37,284 crore. While there were 11 other companies staring at same fate as Essar Steel, it chose to challenge RBI’s direction in the Gujarat High Court, which was later dismissed. Essar claimed it belonged to 488 companies which were given six months time to restructure their debt.
Bhushan Power & Steel Ltd: Bhushan Power and Steel, a sister company of Bhushan Steel, also has a loan default of Rs 37,248 crore. Bhushan Power and Steel was dragged to the NCLT by the Punjab National Bank.
Alok Industries: Alok Industries, which is a Mumbai-based textile manufacturing company, has a loan default of Rs 22,075 crore. The NCLT, in July, admitted insolvency proceedings against the company filed by State Bank of India for recovery of its Rs 3,772 crore loan. Other lenders include Punjab National Bank, Bank of Baroda, IDBI Bank, Standard Chartered Bank etc.
Amtek Auto Ltd: Amtek Auto, one of the largest integrated component manufacturers in India, has a loan default of Rs 14,074 crore. SBI had moved the NCLT for bankruptcy proceedings against the bank.
Monnet Ispat and Energy Ltd: Monnet Ispat and Energy, one of India’s steel producers have a loan default of Rs 12,115 crore. The bankruptcy proceeding against the company was approved by NCLT in July.
Electrosteel Steels Ltd: Electrosteel Steels is an Indian water infrastructure company based in Khardah near Kolkata. The loan default by the company stands at Rs 10,273 crore. Consortium leader SBI had initiated insolvency proceedings, which was admitted by NCLT.
Era Infra Engineering Ltd: Era Infra Engineering, one of India’s infrastructure companies, has a loan default of Rs 10,065 Crore. Union bank had moved the NCLT against the company, but the tribunal reserved its order over jurisdiction issues. There are many winding-up petitions pending in the Delhi High Court against the company which has superior jurisdiction over NCLT.
Jaypee Infratech Ltd: Jaypee Infratech is a subsidiary of conglomerate Jaypee Group founded by Jaiprakash Gaur. It has a loan default of Rs 9,635 crore. In August, NCLT had admitted insolvency petition filed by IDBI bank, but the Supreme Court stayed the order after home buyers filed petitions against the move. The company is now seeking to sell Yamuna Expressway to raise Rs 2,500 crore to compensate homebuyers.
ABG Shipyard Ltd: ABG Shipyard, an Ahmedabad-based shipbuilding company, has a loan default of Rs 6,953 crore. The company is one of the two companies among the 12 which has agreed to loan default and bankruptcy proceedings initiated by the banks.
Jyoti Structures Ltd: Jyoti Structures, a power transmission and distribution company, has a loan default of Rs 5,165 crore. The company became the first among the 12 companies to face the bankruptcy proceedings. The petition for insolvency was filed by its lead lender SBI. Like ABG Shipyard, Jyoti Structures did not oppose the bankruptcy proceedings against it.
(Disclaimer: The amounts cited in the report are loan defaults by the companies and not bad loans. A loan becomes bad when a bank declares that it cannot recover the amount lent to a company. The RBI has estimated these 12 accounts constitute about 25% of the gross NPAs.)- Sourced from Internet.
J.Shriyan
In a moment of deep introspection, Duryodhana, the eldest of the Kauravas, in the battle of Hastinapura in Mahaabhaaratha, remarked. “I know what is right, but I cannot act upon it. I know what is wrong but I cannot get away from it. Helplessly I do things as dictated as if, by some power”.
On July 19, 1969, was Mrs. Indira Gandhi the then Prime Minister of India, a victim of such a confused state of mind? On this day she recommended to the Acting President of India and the Acting President Mr. Varahagiri Venkata Giri signed an Ordinance to nationalize 14 privately owned commercial banks, which had more than Rs. 50 crores in deposit, estimated to have controlled some 70% of the deposits in the country. When the ordinance was signed, Mr. Varahagiri Venkata Giri was the acting president. Dr. Zakir Hussain had died while in office on 3rd May 1969. Until then State Bank of India was the only Indian bank not privately owned.
In the context of developing India, this measure of taking over the ownership of 14 privately owned banks, by the government, was a monumental economic measure. Three reasons were advanced for the nationalization of these 14 private banks. A report in the Economic Times had pointed out that there were some 361 private banks which had ‘failed’ across the country during 1947 to 1955 period. This resulted in depositors losing all their money since banks did not offer any guarantee. Clearly there were no controls governing the operation of these banks. Secondly these privately owned commercial banks were mostly catering to large business and industrial houses and had mostly ignored agriculture and other priority sector constituting small industries, small traders and small entrepreneurs. Thirdly, these private banks were in town and cities only. They did not open branches in rural areas. Government of the day wanted to open bank branches even in backward areas. However what is important to note here is the demand by a vocal socialist section within Congress which also wanted these banks to be taken over by the government for their obvious failure. Thus it was the internal crisis within the Congress party that really led to the bank nationalization. It helped the pro-poor image of Mrs Indira Gandhi and helped her enormously at the elections that followed.
The first bank nationalization in India was in 1955. East India company had established –The Bank of Bengal in 1809, The Bank of Bombay in 1840 and – The Bank of Madras in 1843. All these 3 banks were amalgamated in 1921 and named as Imperial Bank of India, which, on becoming politically free, India nationalized it in 1955 to become the State Bank of India.
“Two grabbing hands” observed Mr. Sharu Rangnekar, an eminent management expert, “are all that the private enterprise could present before the people. There is a crisis of image in this sector”, while talking on “A philosophy without face”. But justifying the existence of private enterprise, A.D Shroff, founder president of the Forum of Free Enterprise remarked on record, “free enterprise was born with man and shall survive as long as man survives”. Between these two contrasting observations it is necessary to recognize that ever since the dawn of civilization, ever since the cave man became enterprising in his relentless pursuit of aggrandizing wealth at the cost of any and everything, that the interest of the individual and that of society were found to be at cross roads. Obviously, the capitalist slogan of Eugen Black, the first President of IMF, that “people must come to accept private enterprise not as a necessary evil, but as an affirmative good” failed to click. Years that went by saw private enterprise failing to keep alive the feeling that it was socially conscious. Much of the hopes and promise that was reposed in it receded gradually and faded into nothingness. It conveniently forgot its social responsibilities and failed to make meaningful contribution to the public good.
No wonder, propped by the public sentiments and electoral compulsion Mrs Gandhi decided and acted upon nationalizing the banks which, despite possibilities of being helpful to poor and under privileged, did hardly anything to promote banking, encouraging saving, or extending credit. Indeed banks in India before 1969, had done precious nothing to empower a large section of Indians. But fact of the matter is private enterprise is far more efficient, far more cost conscious and therefore more productive and obviously better managed. So, it was a clash between private enrichment and a perception of public good that led to nationalization of banks in India. Thus babus in the Ministry of Finance at Centre became the mai/baap for those banks.
In Karnataka, politicians of the ruling party, used the nationalization to promote their political agenda of bringing bank to everybody. Among them Loan Mela of Janardhan Poojari, the then Minister of State for Finance is the most important.
While it is true that people like Janardhan Poojari, have made it easier for poor people of Karnataka to enter the bank premises, he also unwittingly introduced a culture of NRPL, Non Repayment of Loan, leading to NPAs.
For those who are not aware of Loan Melas, an explanation is needed. It happened only in Karnataka, as Janrdhan Poojari is from coastal city of Mangalooru in Karnataka. Political workers allegedly of Congress party, would distribute loan application forms duly stamped for the purpose of identification by the bank officials. These forms, according to unconfirmed information, were sold for Rs.500/- to the favourites of those political workers. Those who got the form would go to the bank and bank officials would fill the form and upon signature disburse Rs.5000/- to Rs.25000/- to each applicant as loan. There are allegations that these applicants, after receiving the loan amount may have shared the amount with the political worker who gave the form, and the applicant was advised not to repay the loan. Hence NPA was started in a big way by this one innocuous act of Janardhan Poojari and Company. Reportedly it had run into hundreds of crores of rupees.
Thus for the first time political interference was introduced into banking in India. And over the years this interference has only increased. Appointment of General Manager and above like Executive Directors, Managing Directors and Chairmen were with appropriate political connections. There are allegations that huge money even changed hands to confirm these senior appointments to Boards of these public sector banks.
Naturally who have been appointed due to political connections ended up obliging politicians and bureaucrats in disbursing loans, and loans ended up, after intervals of window dressing, into the ballooning Non Performing Assets.
As we all know, in banking sector, there are both public and private sector players. Public sectors are government owned and private sectors are owned by individual share holders including their promoters. However, at present even public sector banks have gone partly private due to the sale of shares by government and also by fresh share offerings to general public. But majority shares have always remained with government.
Here it is important to note that bad loans or NPAs are comparatively more in public sector banks as compared to private sector banks. It is because accountability in private sector banks are far more stringent as compared to public sector banks. Beside the ‘chalta hai’ attitude of its personnel from top to bottom, they also succumb to offer of pay offs to look the other way, when things are not as per banking norms. Same may not be the case with private sector banks, with more stringent due diligence expected from its personnel at all levels. Of course, corruption is not only confined to public sector enterprises including banks, even private sector banks too are victims of this malaise. But being privately owned and controls and regulatory mechanisms of checks and balances are continuously present, any wrong move or misdeed is detected much earlier and faster. But since profit motive is the driving force, considerations of societal good is not a priority in private enterprise. But in public sector banks the social objective of empowerment of general public and service orientation is primary consideration while profitability is also a consideration. Thus their lending policies, credit practices are more inclusive. But in reality bank managers in public sector banks have been known to be difficult to smaller business demanding all kinds of requirements in terms of documentation, securities, sureties etc. while granting loans. And similar difficult unyielding positions are given a go-by when it comes to better off customers. A report datelined Chennai, “Madras HC slams banks for having different yardsticks to grant loans to affluent and poor” said it all.
That is how Vijay Mallyas and Nirav Modis have emerged. They have managed to keep everybody happy since they were happy too. In the process, it is the public money, the tax payers’ hard earned money, that is being allowed to loot and loot interminably. If Vijay Mallya was allowed to flee with some Rs.9000 crore of defaulted loan, comes the story of another big time looter Nirav Modi with some Rs.11500 crores having bolted before the door could be bolted. Reportedly Nirav Modi & his uncle Mehul Chokshi have used letters of undertaking very freely with the active connivance of PNB staff. And those two are not the only defaulters. There are thousands of them, and defaulted loans running into lacs of crores of rupees. While nationalization did not serve the purpose of garibhee hatao, empowering small traders and agriculture, it certainly helped the likes of Mallya & Nirav and thousand others to enrich themselves. Thus the question is whether nationalization was right after all! These Vijay Mallyas or Nirav Modis could not have managed to flee the way they did with PSBs, if it was HDFC or ICICI or at least the scale of cheating couldn’t have been so high with their fake documentation. In private sector surely several heads would have rolled, as a consequence.
Here it is very interesting to note that almost five years ago, reportedly an independent director of Allahabad Bank, Dinesh Dubey, had raised and recorded an objection to a management/government push for loans given to Gitanjali Gems of Nirav Modi/Mehul Chokshi (See Box). At that time the present CMD of PNB Sunil Mehta had served earlier as ED of Allahabad Bank. Curiously, the former CMD of PNB who served PNB, a 5 years term from 2009/2014, was formerly the CMD of Allahabad Bank. These are questionable revelations leading to unavoidable conclusions. This has led to political mudslinging between the ruling and opposition parties accusing each other as mother and father of these scams.
While we are about it, it is very pertinent to know that India’s bad loan problem ranks among the world’s worst. In fact we are the 5th after Greece, Italy, Portugal and Ireland. We are followed by Russia, Rumania, UAE, Hungary and Spain to complete the top ten in the race among 39 major world economies infested with bad loans, so informs a report by Care Ratings.
So, is privatization and a strong regulatory control on the entire banking sector is the only remedy? Reportedly FICCI (Federation of Indian Chamber of Commerce & Industry) has demanded privatizing of public sector banks. According to them “Recapitalization in the last 11 years has had limited impact in improving the health of public sector banks. These banks which constitute almost 70% of Indian banking are saddled with burgeoning stressed assets”.
Yes, privatization may or may not be the solution under the circumstances. The question is, all those who are responsible for this mess in the banking sector should be made strictly accountable with stringent action for complicity, including imprisonment. After all, banking industry thrives on depositors’ money. Banking works on trust and credibility. Those who play with the trust of general public must pay for it with compound interest with both physical and pecuniary suffering. Only then may be some semblance of probity in the Indian banking sector could be restored.
India’s Bad Loans: the list of 12 big defaulters
According to the RBI, just 12 companies are estimated to account for 25% of the gross NPAs, and were identified for immediate bankruptcy proceedings.
Bhushan Steel Ltd: Bhushan Steel, the largest manufacturer of auto-grade steel in India, has a loan default of Rs 44,478 crore. The State Bank of India (SBI), the lead bank of the consortium of lenders, had moved the NCLT for recovery of its loan. The NCLT has reserved its order on the plea.
Lanco Infratech Ltd: Lanco Infratech, once listed among fastest growing in the world, has a loan default of Rs 44,364 crore. IDBI has already initiated the process under the Insolvency and Bankruptcy Code against company’s loan defaults.
Essar Steel Ltd: Essar Ltd, one of the biggest in India and abroad in the steel sector, has a loan default of Rs 37,284 crore. While there were 11 other companies staring at same fate as Essar Steel, it chose to challenge RBI’s direction in the Gujarat High Court, which was later dismissed. Essar claimed it belonged to 488 companies which were given six months time to restructure their debt.
Bhushan Power & Steel Ltd: Bhushan Power and Steel, a sister company of Bhushan Steel, also has a loan default of Rs 37,248 crore. Bhushan Power and Steel was dragged to the NCLT by the Punjab National Bank.
Alok Industries: Alok Industries, which is a Mumbai-based textile manufacturing company, has a loan default of Rs 22,075 crore. The NCLT, in July, admitted insolvency proceedings against the company filed by State Bank of India for recovery of its Rs 3,772 crore loan. Other lenders include Punjab National Bank, Bank of Baroda, IDBI Bank, Standard Chartered Bank etc.
Amtek Auto Ltd: Amtek Auto, one of the largest integrated component manufacturers in India, has a loan default of Rs 14,074 crore. SBI had moved the NCLT for bankruptcy proceedings against the bank.
Monnet Ispat and Energy Ltd: Monnet Ispat and Energy, one of India’s steel producers have a loan default of Rs 12,115 crore. The bankruptcy proceeding against the company was approved by NCLT in July.
Electrosteel Steels Ltd: Electrosteel Steels is an Indian water infrastructure company based in Khardah near Kolkata. The loan default by the company stands at Rs 10,273 crore. Consortium leader SBI had initiated insolvency proceedings, which was admitted by NCLT.
Era Infra Engineering Ltd: Era Infra Engineering, one of India’s infrastructure companies, has a loan default of Rs 10,065 Crore. Union bank had moved the NCLT against the company, but the tribunal reserved its order over jurisdiction issues. There are many winding-up petitions pending in the Delhi High Court against the company which has superior jurisdiction over NCLT.
Jaypee Infratech Ltd: Jaypee Infratech is a subsidiary of conglomerate Jaypee Group founded by Jaiprakash Gaur. It has a loan default of Rs 9,635 crore. In August, NCLT had admitted insolvency petition filed by IDBI bank, but the Supreme Court stayed the order after home buyers filed petitions against the move. The company is now seeking to sell Yamuna Expressway to raise Rs 2,500 crore to compensate homebuyers.
ABG Shipyard Ltd: ABG Shipyard, an Ahmedabad-based shipbuilding company, has a loan default of Rs 6,953 crore. The company is one of the two companies among the 12 which has agreed to loan default and bankruptcy proceedings initiated by the banks.
Jyoti Structures Ltd: Jyoti Structures, a power transmission and distribution company, has a loan default of Rs 5,165 crore. The company became the first among the 12 companies to face the bankruptcy proceedings. The petition for insolvency was filed by its lead lender SBI. Like ABG Shipyard, Jyoti Structures did not oppose the bankruptcy proceedings against it.
(Disclaimer: The amounts cited in the report are loan defaults by the companies and not bad loans. A loan becomes bad when a bank declares that it cannot recover the amount lent to a company. The RBI has estimated these 12 accounts constitute about 25% of the gross NPAs.)- Sourced from Internet.
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