ABG Shipyard fraud: Banks' detection faster than usual, says FM Sitharaman

The alleged Rs 22,842 crore ABG Shipyard fraud is the largest fraud detected in the Indian banking system yet.

The consortium of banks — involved in lending to ABG Shipyard — that turned into a non-performing asset (NPA) and then a fraud, followed all due processes. These banks detected and determined the fraud faster than the usual time of 52-54 months, finance minister Nirmala Sitharaman said on Monday.

“The process has been going on since 2014. In general, for any account, determining the element of fraud takes almost 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. All evidence was collected and given to the Central Bureau of Investigation (CBI). Meanwhile, in parallel, an NCLT (National Company Law Tribunal) process is also ongoing,” Sitharaman said.

The finance minister was addressing a media briefing along with Reserve Bank of India (RBI) Governor Shaktikanta Das, after the RBI’s board meeting in New Delhi.

The Opposition, including the Congress, said 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 (SBI) to CBI in 2019.

ABG’s account was declared NPA in November 2013. Several efforts were made to revive the company, and in March 2014, a comprehensive restructuring began. 

When that failed, the account was again classified NPA in July 2016. E&Y was appointed as the forensic auditor in 2018.

The CBI last booked ABG Shipyard, its former chairman and managing director (former CMD) Rishi Kamlesh Agarwal and others for allegedly cheating a consortium of two dozen lenders. The probe agency will also examine the involvement of ‘public servants’ in the fraud.

The ABG Shipyard fraud is much bigger than the one perpetrated by Nirav Modi and his uncle Mehul Choksi. The duo had allegedly cheated Punjab National Bank (PNB) of around Rs 14,000 crore through issuance of fraudulent letters of undertaking (LoUs).

“I don’t want to politicise this too much as I am sitting in the RBI office, but 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.

Sitharaman also said that during the NDA regime, the health of banks has improved and they are in position to raise funds from the market.

Talks on CBDC, crypto 

Speaking on other issues, the finance minister said discussions with regard to crypto regulations and the planned central bank-backed digital currency have been going on with the RBI. A decision on these issues will be taken after due deliberations.

Sitharaman — during her Budget speech — had announced that Digital Rupee or Central Bank Digital Currency (CBDC) would be issued by the RBI in the coming fiscal year. 

She had also announced that the government will levy 30 per cent tax on gains made from any other private digital assets from April 1.

Das said that the issue is under discussion between the RBI and the government. 

“Whatever points we have, we discuss with the government,” he added. Last week, Das had said the central bank does not want to rush and is carefully examining all aspects before introducing the CBDC.