The scam related to ABG Shipyard is in the news. It is being told as the biggest bank fraud in the country. Due to this the opposition has targeted the government. The government seems to be trying to defend itself.
The question is, has our banking system not become full-proof even after one after the other losses in the last few years? Is there any deficiency in the regulation of RBI? Is the government not interested in creating a system in which it is impossible to scam? Let us try to know the answers to these questions. We will also find out why the loss caused by these losses is not limited to just money.
Is this the biggest bank scam in the country?
The country’s largest investigative agency CBI has registered a case against ABG Shipyard, its former chairman and MD Rishi Agarwala and others. They are accused of defrauding 28 banks to the tune of Rs 22,842 crore. This amount is much bigger than the Rs 12,000 crore PNB scam of Nirav Modi and Mehul Choksi. Before PNB, Vijay Mallya cheated many public and private banks. This scam was also about Rs 9,000 crore.
How did the scam come to light?
This scam of ABG Shipyard came to light when E&Y investigated in 2019. He conducted forensic examination for the period April 2012 to July 2017. During investigation it was found that the company committed fraud during this period. This also included misappropriation of money taken as loan from the bank. With the loan money, the officials even bought properties abroad. The loan money was used by the company for other group companies. Sources say that the banks gave this money to the company between 2005 and 2010. But, the fraud came to light after the investigation of E&Y.
When was ABG Shipyard started?
ABG Shipyard was started in 1985. It introduced its IPO in 2005. It makes ships. It has shipbuilding facilities at Dahej and Surat in Gujarat. In view of its capacity of shipbuilding, the government had allowed it to be built for the Indian Navy and Coast Guard as well. It used to get orders to ship from all over the world. After 2012, the condition of the company started deteriorating. E&Y’s audit report from 2012 to 2017 revealed that top executives of the company misused the loan money taken from banks. The company took it from banks and used it for its other companies. Evidence of buying property with loan money has also been found.
How did the company’s business sink?
Corruption in the company started affecting its business. On one hand the loan of banks increased, on the other hand its income decreased. Its bad days started with the demand for cargo declining. The orders received by the company to make the ship started getting canceled. The government also stopped ordering it. The company’s accounts were declared non-performing assets in 2013 after pressure mounted. Again in 2017 its loan was restructured. But the company’s business failed to get back on track. Then, the matter of ABG Shipyard was referred to the National Company Law Tribunal (NCLT).
Which banks owe money?
ABG Shipyard owes Rs 7,089 crore to ICICI Bank, Rs 3634 crore to IDBI Bank, Rs 2,925 crore to SBI, Rs 1,614 crore to Bank of Baroda, Rs 1,244 crore to PNB and Rs 1,228 crore to Indian Overseas Bank. Apart from this, other 22 bank dues are on this company.
How does a bank scam affect the economy?
The loss caused by a scam in a bank is not limited to just scam money. It affects the entire economy. On the one hand, it reduces the capital of the banks. This reduces their ability to lend. This makes it difficult for the industry to get loans for growth.
Second, the bank officials involved in the scam are investigated. Many such officers are also affected in this, who are not related to the scam. This affects the confidence of the employees of the bank. Senior officials are afraid to take decisions.
Third, legal action against those involved in scams also costs money and other resources. Such cases go on for years. During this time money keeps coming out of the government treasury. The cases of Nirav Modi and Vijay Mallya are examples of this.
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