FM defends time taken to file fraud complaint in ABG Shipyard

New Delhi: Finance Minister Nirmala Sitharaman on Monday defended five years taken to file the first fraud complaint in the Rs 22,842 loan default by Gujarat-based ABG Shipyard, saying the time taken to detect the fraud was less than normal.

She said the loans were given under the Congress-led UPA regime and the account became a non-performing asset (NPA) in November 2013 and the debt was restructured in March 2014 by all lenders but it could not be recused.

Opposition Congress has accused those sitting in the highest echelons of power in the Narendra Modi government of complicity, collusion and connivance in what it described as "India's biggest bank fraud" - Rs 22,842 crore being bigger than the Rs 14,000 crore PNB scam by Nirav Modi and his uncle Mehul Choksi.

Asserting that a bank follows a certain process to declare an account fraud, Sitharaman said banks almost take 52-54 months to complete intensive work before a decision is taken.

"In this particular case (ABG Shipyard)...I should say to the credit to the banks, they've taken lesser than what is normally an average time to detect these kinds of frauds...Normally, it takes I said 56 months and off-late it is taking far lesser time to detect such things," she said after customary post Budget address to RBI board members here.

State Bank of India (SBI) in a statement on Sunday stated that the loans given to ABG Shipyard had become NPA on November 30, 2013, but after a failed debt restructuring, it was "classified as NPA in July 2016 with backdated effect from November 30, 2013."

Congress has questioned why the government took five years after the liquidation proceedings of ABG Shipyard to lodge an FIR in connection with the alleged duping of 28 banks.

According to SBI, the first complaint was filed with CBI in November 2019 and "a fresh and comprehensive second complaint was filed in December 2020."

E&Y was appointed as forensic auditor by lenders in April 2018 and they submitted their report in January 2019. E&Y report was placed before the Fraud Identification Committee of 18 lenders in 2019. Fraud is mainly attributed to diversion of funds, misappropriation and criminal breach of trust.

"I am sitting in RBI premises, so I don't want to talk too much of politics, but I am sorry the kind of noise coming biggest 'ghotala' in Prime Minister Narendra Modi's time. Not at all. This was a loan given well prior to 2013 and it had become even an NPA by 2013. So people dig holes into which they themselves fall," the finance minister said.

"They made the noise, not realizing that it was all then (UPA regime) and we have taken lesser time to detect it take action...So action is happening here like the way it happened for every other major bank defaults," Sitharaman said.

Talking about the health of the banking sector, the Finance Minister said it has improved and all the public sector banks have done well.

"They have turned around as 4 Rs – Recognition, Resolution, Recapitalisation, Reforms – have worked and as a result, I can say the banks are such confident today they are able to raise resources from the market," she said.

Meanwhile, RBI in a statement said the Finance Minister in her customary address to the Central Board of Directors of Reserve Bank of India outlined the thinking behind the Union Budget 2022-23 and the priorities of the government.

Complimenting the Finance Minister on the Budget, the Board members made various suggestions for consideration of the government.

The Board in its meeting reviewed the current economic situation, global and domestic challenges, it said, adding, the Board also felicitated N Chandrasekaran, Director, on being awarded Padma Bhushan.

Sitharaman was accompanied by Minister of State for Finance Bhagwat K Karad, Finance Secretary T V Somanathan, Tuhin Kanta Pandey, Secretary,Department of Investment and Public Asset Management, Revenue Secretary Tarun Bajaj, Financial Services Secretary Sanjay Malhotra and Economic Affairs Secretary Ajay Seth and newly appointed Chief Economic Advisor V Anantha Nageswaran.

As regards cryptocurrencies, the Finance Minister said discussions are going on with the Reserve Bank and a decision will be taken after deliberation.

On the proposed LIC initial public offering (IPO), Sitharaman said the filing of DRHP has created a positive buzz in the air that the government has committed itself and its showing.

Speaking at the briefing, RBI Governor Shaktikanta Das said, the "momentum of inflation is on a downward slope" and the central bank would continue to strike a delicate balance between the need to contain price rise and ensure economic growth.

With regard to global spillovers, Das said "continuously we monitor the global developments and we are prepared to deal with global spillovers. The strong forex reserves of USD 600 billion and also I am not making out a state secret, the quantum of forex, which we hold in the forward market if you add that I think India is well placed to deal with global spillovers."

He also said there won't be any tantrums this time as the US Fed is fully conscious of what happened in 2013.

"They have been giving sufficient advance guidance. Now whether there will be three rate hikes or four rate hikes or five rate hikes, it is anybody's guess...as go forward, it will again depend on the inflation dynamics, the growth dynamics also within the United States," he said.

The growth momentum in many of the advanced countries is slowing down which has to be kept in mind, he added.