ABG Shipyard fraud case: Such cases are fully provided for, there will be no impact on profit/loss accounts of any bank, says SBI MD

Mumbai (Maharashtra) [India], February 13 : After CBI registered an FIR against ABG Shipyard and its directors for allegedly cheating 28 banks of Rs 22,842 crores, State Bank of India managing director, risk compliance and stressed assets resolution group, Swaminathan Janakiraman on Sunday said that the necessary efforts were attempted by various banks to revive the company, however, it was found that the promoters have indulged in the diversion of funds taken as loans after which the account was classified as fraud.
He further stated that the SBI aims to recover as much as possible, adding, "such cases have been fully provided for, so there will be no impact on the balance sheet of any of the banks or profit/loss accounts."
Speaking to ANI on the matter, Janakiraman said, "What I would like to clarify is that this is an NPA from 2013 onwards and necessary efforts were attempted by various banks to revive the company. However, during the course of the forensic audit, it was found that the promoters have indulged in the diversion of funds which gave rise for the account to be classified as fraud."
Talking about the entire sequence of events in the case, the Managing Director said, "ABG Shipyard is a 25-year-old company and was incorporated for shipbuilding and ship repairs. This has been enjoying credit facilities from about 28 banks since 2001. For 10 years, they built and repaired more than 160 vessels. However, the company could not sustain for long, and due to unviable operations, the company was declared an NPA in November 2013. Thereafter under the debt researching mechanism, the banks restructured the dates and gave a longer time frame for the company to repay the dues. This was approved in 2014."
Further elaborating the case, he said that the company faced the downturn, the given projection for restructuring could not be achieved by the company and the account was once again classified as an NPA.
"The restructuring package was in implementation for over two years. But the shipping industry also faced the downturn during that time, so the projections that were given for the restructuring could not be achieved by the company and finally in 2016, the account was once again classified as NPA from 2013 onwards. Thereafter as it happens in large NPA cases, the forensic audit was ordered by the lead bank which is ICICI Bank," he said.
"The forensic auditors submitted their report in 2019 which indicated diversion of funds and transfer of funds to related parties and also usage of funds for the purposes for which the loan was not granted. So on account of these allegations, the forensic audit report was discussed among the joint forum of lenders led by ICICI Bank and also IDBI Bank. The third-largest lender was SBI. All the banks together decided to classify the account as 'fraud' in 2019," the Managing Director added.
Janakiraman told ANI that because SBI was the largest Public Sector bank, it was authorised by the other member banks to file the CBI complaint.
"As SBI was the largest Public Sector bank, SBI was authorised by the other member banks to file the CBI complaint. The first complaint was filed in November 2019. CBI gathered evidence through their inquiries and whatever transactions that were flagged in the forensic audit were further probed. The lenders' meetings were also held on various occasions to gather more information about the diversion and misuse of the funds that were granted. Once again in December 2020, a consolidated and comprehensive complaint was filed with CBI," he said.
He further said that this normally happens in large value corporate debts because the nature of transactions is very complex and multiple companies are involved. So this requires back and forth correspondence between the bankers and the law enforcement agencies.
"In few such large cases, it is always customary for the banks to file a comprehensive second complaint which later on gets converted into an FIR once the CBI completes its formalities. So the complaint FIR has been registered recently," he said.
"Thereafter the CBI complaint has been revised and the FIR has now been registered. The company is under liquidation now under the NCLT process. The official liquidator is pursuing the recovery from the available resources and the bankers are very closely working with the law enforcement agencies as well as the official liquidator to ensure that from the available asset, whatever maximum recovery is possible, the lenders will pursue," Janakiraman said.
Asked about the cause of the delay in the registration of the FIR, he said that in large value cases, the CBI has to carry out a lot of investigation to unearth the sequence of events which takes a year or two.
"In large value cases like this, the complexities are many and unlike in a normal complaint where an FIR could be filed immediately, in large value frauds, CBI requires a lot of information. Based on the forensic audit, they also have to carry out a lot of investigation to unearth the complete sequence of events which typically takes a year or two. So I don't see any delay," he added.