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The consortium of banks involved in lending to ABG Shipyard, which turned NPA and then a fraud, followed all due processes and detected and determined the fraud faster than the usual time taken of 52-54 months, Finance Minister Nirmala Sitharaman said on Monday.
“The process has been going on from 2014. In general for any account, determining the element of fraud almost takes 52-54 months. I should say to the credit of the banks, they have taken less time than the average to detect the fraud. A forensic audit was done. Every evidence was collected and given to the Central Bureau of Investigation. Meanwhile in parallel an NCLT process is also ongoing,” Sitharaman said.
The Finance Minister was addressing a media briefing along with Reserve Bank of India Goveror Shaktikanta Das, after the RBI’s board meeting in New Delhi.
The alleged Rs 22,842 crore fraud by ABG Shipyard is the largest fraud detected in the Indian banking system yet. The lead bankers were ICICI Bank and IDBI Bank but the complaint was first filed by State Bank of India to CBI in 2019.
ABG’s account was declared non-performing asset in November 2013. Several efforts were made to revive the company and in 2014 a comprehensive restructuring began in March 2014. When that failed, the account was again classified as NPA in July 2016. E&Y was appointed as the forensic auditor in 2018.
The CBI last week booked the shipping company’s directors and will examine the involvement of ‘public servants’ in the fraud.
“I don’t want to politicize this too much as I am sitting in the RBI office, but these noises are being made of how this is the biggest fraud under this government. One should not forget that the account was first declared NPA in 2013,” Sitharaman said.
At the same briefing, RBI Governor Das touched upon high crude prices and said that the central bank’s retail inflation outlook for FY23 was quite ‘robust’. The price of brent crude touched $95 a barrel today, a seven-year high, on fears that Russia’s invasion of Ukraine is imminent, and the possible supply disruptions resulting from that.
“When you do inflation projection, you assume a crude price for the whole year, a particular price and a range of prices. If you take $95 a barrel and make a projection for the entire year you will definitely go wrong. It may go up further and come down steeply,” Das said.
“We have made our inflation projections based on many factors that can be anticipated and foreseen as of today. We have modeled within that. At this point of time, our inflation projections are quite robust,” he said. The central bank has projected average CPI inflation of 4.5 percent in FY23.
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