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Sunday, February 23, 2020

Lenders are not policemen, can’t catch each fraud: SBI chief

Kumar’s statement comes nearly a week after the Reserve Bank of India said SBI had under-reported its bad loans by Rs 11,932 crore for the fiscal ended March 31.

By: ENS Economic Bureau | Mumbai | Updated: December 17, 2019 5:10:38 am
State Bank of India , Rajnish Kumar, Rajnish Kumar on lenders, Rajnish Kumar on bad loans, SBI bad loans State Bank of India Chairman Rajnish Kumar.

State Bank of India Chairman Rajnish Kumar on Monday cautioned against placing too much onus on lenders being held responsible for loans which turned bad or in cases of fund misappropriation by companies, and said that banks were “not policemen” or “Enforcement Directorate”.

“Lenders are not policemen. They are not Enforcement Directorate. … In the normal course of business, it is extremely difficult for them to look for each and every method of siphoning of funds,” said Kumar at an event here. Asserting that the Insolvency and Bankruptcy Code (IBC) had brought about major changes in the behaviour of bankers in the country, the SBI Chairman said that lenders were now far more cautious from the first stage itself, which starts with sanctioning of loans. “The first stage is the sanction, where there is greater scrutiny about the leveraging, the coverage ratio, and the visibility of the equity. That is the first major change. The second stage is the monitoring, which is how do you monitor, and whether the money is being used for the purpose. This is not an easy task,” he said.

Kumar’s statement comes nearly a week after the Reserve Bank of India said SBI had under-reported its bad loans by Rs 11,932 crore for the fiscal ended March 31. According to the assessment done by the central bank, the gross non-performing assets (NPAs) of SBI was at Rs 1,84,682 crore as against Rs 1,72,750 crore reported by the bank for 2018-19.

“There are various methods which bankers were aware of, such as over-invoicing or under-invoicing, and related party transactions. “You can monitor the transactions of on-record related parties, but what to do of the related parties not declared but still related. How do you deal with shell companies?,” Kumar said, adding that though lenders were using technological tools, they could yet not claim to have plugged all the loopholes.

Kumar also raised doubts on the efficacy of consortium of lenders and said that while earlier he was of the view that it was a method to mitigate risk, of late, the arrangement was proving to be a source of daily hypes. “There is a multiplicity of lenders and then there is no one lender that is in control of the account. That is a problem …” he said.

ArcelorMittal completes takeover of Essar Steel

New Delhi: ArcelorMittal on Monday said it has completed the acquisition of debt-laden Essar Steel, marking the former’s entry into Indian steel business. ArcelorMittal has formed a joint-venture with Nippon Steel to operate and manage Essar Steel. Aditya Mittal, president and CFO of ArcelorMittal, has been appointed chairman of the JV, while Dilip Oommen has been appointed its CEO.

With the completion of the Essar acquisition, State Bank of India expects a boost in profitability in the third quarter of current financial year. SBI is set to recover nearly Rs 12,000 crore as it was the biggest lender to Essar Steel. Other than money coming from ArcelorMittal in the Essar Steel case, the recoveries made in other cases in the pipeline will have positive impact for SBI in the fourth quarter, the lender’s chairman Rajnish Kumar said. —ENS

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