A consortium led by State Bank of India (SBI) loaned money to Sterling Group, owned by Nitin and Chetan Sandesara, in 2015 even though SBI’s own subsidiary, State Bank of Mysore, had filed a criminal complaint against Sterling Biotech Ltd for loan default, as early as 2012 and declared its promoters “wilful defaulters” in 2014, The Indian Express has learnt.
Sources said that in 2012, State Bank of Mysore (SBM) had moved a magistrate court in Mumbai asking it to issue an arrest warrant against the promoters of Sterling Group for defaulting on loan repayment of Rs 80.90 crore.
Subsequently, in 2014, SBM, which was 90 per cent owned by SBI, was the first bank to declare Nitin Sandesara, Chetan Sandesara and Sterling Biotech wilful defaulters as per guidelines of the Reserve Bank of India (RBI).
Despite this, in September 2015, a SBI-led consortium of banks extended guarantees in the form of Standby Letters of Credit (SBLCs) of around Rs 1,300 crore to Sterling Global Oil Resources Ltd, a foreign subsidiary of the beleaguered Sterling Group.
The decision to lend to a Sterling Group company in 2015 by the SBI-led consortium has come under the scanner of investigating agencies probing the Sterling Group because the RBI norms mandate that no new credit facilities can be given to promoters and companies who are on the list of wilful defaulters, said sources familiar with the development.
Reached for comment, a spokesperson for SBI said in an email: “It is a policy of the Bank not to comment upon individual accounts and its treatment.”
The SBI-led SBLC facility to Sterling was supported by other banks including Bank of Baroda whose London branch had earlier arranged a External Commercial Borrowing (ECB) for Sterling Biotech. This ECB subsequently became a non-performing asset.
Incidentally, investigations have also found that the RBI’s Department of Banking Supervision did not flag or stop the new credit facility extended by the consortium to the company in 2015, even though the 2012 criminal complaint of SBM against Sterling Biotech and the company/promoters’ wilful defaulter status was put in public domain.
An email sent to RBI for comments did not elicit any response. The State Bank of Mysore and three other associate banks of SBI were merged with SBI in 2017. The total debt of the Sterling Group stands at about Rs 15,000 crore.
The CBI and the Enforcement Directorate have booked Sterling Biotech, its directors Sandesara brothers, Dipti Chetan Sandesara, Rajbhushan Omprakash Dixit, and a few others in connection with the alleged Rs 8,100 crore bank fraud case.
Probe agencies have claimed that loan funds were diverted for non-mandated purposes, layered and laundered through a web of multiple domestic as well as offshore entities. It is alleged that the Sandesaras used the names of their employees and incorporated 249 domestic and 96 offshore shell companies.
According to the ED, the group was engaged in round tripping of SBLC funds to the tune of Rs 4,500 crore by violating conditions laid down by the RBI while sanctioning the loan. The ED has also moved court to declare Nitin Sandesara, Chetan Sandesara and Dipti Sandesara fugitive economic offenders. They are all said to be in Nigeria.