India’s biggest bank fraud unfolded, ABG Shipyard scam since Congress Ruling?

New Delhi : 18th February 2022:

The ABG Shipyard scam: Inaction on red flags as India’s biggest bank fraud unfolded

Synopsis – ABG Shipyard, now credited with India’s biggest bank fraud, created a web of transactions to cheat a consortium of 28 banks of Rs 22,842 crores between 2012 and 2017, in a case which has come to light only now. The banks include SBI, IDBI and ICICI.

ABG Shipyard, now credited with India’s biggest bank fraud, created a web of transactions to cheat a consortium of 28 banks of Rs 22,842 crores between 2012 and 2017, in a case which has come to light only now. The banks include State Bank of India (SBI), IDBI and ICICI.

The chronology of events, gleaned from FIRs and audit reports, shows long periods of slumber when lending banks and law enforcement agencies did nothing:

1985: ABG Shipyard Ltd, the flagship company of the ABG Group, is incorporated. It is promoted by Rishi Kamlesh Agarwal, and is in the business of shipbuilding and repair, with shipyards in Dahesh and Surat in Gujarat. A consortium of 28 banks, with ICICI as the leading bank, finance it.

Business booms and ABG Shipyard builds 165 vessels in 16 years, including specialised vessels like newsprint carriers, self-discharging and loading bulk cement carriers.

2005-2010: Banks continue to lend generously to ABG Shipyards despite signs of trouble from a global financial crises in 2008

2008: The global financial crises, led by the U.S. housing bubble and the collapse of Lehman Brothers, hits ABG Shipyards. The company now has a paucity of working capital which caused “significant increase in the operating cycle, thereby aggravating the liquidity and financial problem”

March 2014: SBI attempts to re-structure loans to ABG Shipyard under corporate debt restructuring or CDR. The re-structuring fails as ABG Shipyards is unable to service the interest and instalments on the due date

July 2016: The ABG account is declared an NPA, with back-dating to 30 November, 2013

January 2019: SBI identifies a fraud

January 2019: Ernst and Young LLP conducts forensic audit on ABG Shipyard. It finds evidence of fraud between April 2012 and July 2017.

The audit shows that fraud was conducted through “diversion of funds, misappropriation, and criminal breach of trust, with an objective to gain unlawfully at the cost of the bank’s funds.”

ABG Shipyard availed mainly three different types of loans from 28 banks. The monies raised through these loans were then diverted through 98 sister concern companies and mainly used to create personal assets.

November 2019: SBI files a complaint

August 2020: SBI files a more comprehensive complaint

7th February 2022: CBI registers a case, books ABG Shipyard and ABG International Private Ltd. CBI’s FIR says ABG SL owes a total of Rs 22,842 crore. It owes ICICI (which was leading the consortium) Rs 7,089 crore, SBI Rs 2,925 crore, IDBI Bank Rs 3,639 crore, Bank of Baroda Rs 1,614 crore, Punjab National Bank Rs 1,244 crore, Exim Bank Rs 1,327, Indian Overseas Bank Rs 1,244 crore, and Bank of India Rs 719 crore, among others.

15th February, 2022: CBI issues lookout notices against promoter Rishi Agarwal, and ABG executives Santhanam Muthu swamy and Ashwini Kumar.

Source – The Economic Times

India’s biggest bank fraud unfolded, ABG Shipyard scam since Congress Ruling