Nearly ?23,000 Crore Debt, 5 Years & 28 Banks: How ABG Shipyard Pulled Off ¡®India¡¯s Biggest Bank Fraud¡¯
ABG shipyard, a sinking shipbuilding firm based in Gujarat, has reportedly pulled off what seems to be India¡¯s biggest bank fraud of almost ?23,000 crore!
When it comes to bank frauds in India, names like Vijay Mallya and Nirav Modi have occupied the news headlines multiple times, haven't they?
Although these frauds did involve thousands of crores of money, these weren't the biggest frauds in India¡¯s banking history.
It has recently come to light that the ABG shipyard, a sinking shipbuilding firm, has pulled off what seems to be India¡¯s biggest bank fraud!
The loan scam, which stretches for around five years and across 28 banks, involves a massive amount of ?23,000 crores.
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How It Happened
It's being believed that between the years 2012 and 2017, ABG Shipyard Ltd, which is a Gujarat-based firm, purportedly defrauded banks of a combined amount of ?22,842 crores.
Although the scope and scale of the alleged fraud are staggering, the crux of the deception, as per what the CBI is discovering, was the novel way in which the company apparently created a web of transactions to cheat a consortium of 28 banks, including SBI, IDBI and ICICI Bank.
According to CBI sources and as reported by ThePrint, ABG Shipyard took loans from these banks and then diverted them. It allegedly made investments in overseas subsidiaries from the loan amounts, bought assets in the names of affiliated companies, and even transferred money to several related parties.
CBI sources also alleged that the company, whose account had become a Non-Performing Asset (NPA) way back in the year 2013, violated terms of its arrangement for Corporate Debt Restructuring (CDR), which is a relief mechanism in which lender banks either reduce the interest rates on the loans or increase the tenure of the repayment.
The Delays In Fraud Detection
A big issue around this scam is that the case seems to be beset with delays.
Although the SBI had identified the fraud in January 2019, it filed a complaint only in November 2019. Then a fresh, more comprehensive complaint was filed in August 2020, but the CBI finally registered a case only on 7 February 2022 and booked ABG SL and ABG International Private Ltd.
Here is what the largest PSU Bank of India, SBI, tweeted about the fraud.
Press release about ABG Shipyard issue. @DFS_India @FinMinIndia
¡ª State Bank of India (@TheOfficialSBI) February 13, 2022
Our statement -: pic.twitter.com/RP71DBhePD
When & How Was The Fraud Detected?
The alleged fraud came to light during a forensic audit that Ernst and Young LLP (also known as EY) conducted in January 2019, for a period between April 2012 and July 2017.
The audit found that the fraud had taken place during this period and the findings of the audit report reportedly showed 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,¡± as per what SBI said in its complaint.
According to the FIR, a copy of which was accessed by ThePrint, ABG Shipyard now owes a total of ?22,842 crores. Out of this amount, it owes ICICI Bank ?7,089 crores, SBI ?2,925 crores, IDBI Bank ?3,639 crores, Bank of Baroda ?1,614 crores, Punjab National Bank ?1,244 crores, Exim Bank ?1,327, Indian Overseas Bank ?1,244 crores, and Bank of India ?719 crores, among others.
The SBI in its complaint said that the fraud occurred between the period of 2011 and 2017. And CBI sources have said that while the loans were given to the company by these banks between 2005 and 2010, the fraud was detected only after the forensic audit. CBI has recently issued a lookout notice against ABG Shipyard directors.
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Questions That Remain Unanswered
Above all, this case has yet again raised a storm of questions for the banking industry, like How did the fraud go undetected for so long? How was the money diverted? What led to the delay in the registration of the FIR by CBI? Even after so many scams in the past, why does the banking industry keep getting hit by such massive frauds repeatedly? Certainly, a lot of questions remain unanswered for the nation.
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