The State Bank of India (SBI) has sold over 15 delinquent loan accounts at a 65-67% discount under the chairmanship of Pratip Chaudhuri, who is currently under arrest in a 23.5 loan case. rupee crores.
Chaudhuri, 68, is charged in connection with one such sale of non-performing assets (NPA) to an asset reconstruction company (ARC), which occurred after his retirement.
Selling NPAs to the CRA is one of the options for banks to collect bad debts, with the exception of single settlement (OTS) with defaulters. Another tool in the hands of lenders, the Insolvency and Bankruptcy Code (IBC) came into being in May 2016, long after Chaudhuri left the bank.
Chaudhuri, who succeeded OP Bhatt and was replaced by Arundhati Bhattacharya, chaired the Mumbai-based bank between April 2011 and September 2013. It was under Chaudhuri’s tenure that Vijay Mallya’s Kingfisher loan became Postcode for the bank. However, he did not authorize any new term loans to the ailing airline during his tenure.
According to NPA sales records, during Chaudhuri’s tenure, SBI ceded nine default accounts in 2011-12 with a total outstanding of Rs 35.69 crore for a consideration of Rs 12.79 crore. In 2012-13, the bank sold the NPAs of six other companies with an outstanding amount of Rs 139.96 crore for a sale price of Rs 45.84 crore.
These NPAs were sold at a discount of 65 to 67 percent from the outstanding loan amount. Given the large volume of SBI loans, NPA’s sales figures are miniscule, but often accusations of non-transparency arise in these sales, with defaulting promoters going against bank officials.
NPAs are generally sold at a discount to the amount outstanding. “We follow an auction process where whoever offers the best price gets the assets,” said an SBI official.
In fact, loans of smaller amounts, like the one from the Gaudavan Hotel where Chaudhuri is currently billed, are always processed at the branch or zone level. “The CEOs and the President do not deal with such cases as there are defined systems and processes to handle the sale of CRA loans, Single Settlement (OTS), etc.” adds the official.
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Chaudhuri is currently the subject of an action in connection with a term loan sold to a Delhi-based ARC by the SBI.
The loan of Rs 23.5 crore was taken out by Hotel Gaudavan Pvt Ltd, based in Rajasthan, in 2008. Despite the restructuring and rescheduling of the loan by the bank, the borrower was unable to pay the interest. as well as the principal amount. This term loan was then declared NPA in 2010. As part of the recovery measure, SBI even invoked the SARFESI law with the Debt Recovery Tribunal (DRT) against the borrower in July 2013.
Two months later, Chaudhuri retired from the bank in September 2013 and took charge of Alchemist ARC, headquartered in Delhi, immediately after his retirement. Call it a coincidence, but SBI sold the loan to the same ARC in March 2014 where Chaudhuri had joined as a director.
The job of an ARC is to restructure the defaulting loan and make money out of it. As IBC became operational for faster resolution in 2016, Alchemist, the financial creditor of the Gaudavan Hotel, approached the National Company Law Tribunal (NCLT) for resolution in legal proceedings in March 2017.
The NCLT finally settled the case in December 2017 by affixing its seal to the sale of the hotel to JFC Finance, a non-bank finance company (NBFC). Thus, this loan then changed hands from Alchemist ARC, of which Chaudhuri is director, to an NBFC.
The defaulting debtor had filed an FIR with the Rajasthan police against the sale of SBI to ARC and made all of the directors of Alchemist ARC a party to the case, including Chaudhuri. However, SBI has not been named a party to the case.
SBI strongly supports Chaudhuri in this matter. Dinesh Khara, current SBI chairman, stated categorically that “there was no irregularity in the said matter and the prescribed rules and processes were followed by the bank to process this account.”
In its statement, SBI said the hotel property was sold in March 2014 after Chaudhuri retired in September 2013. In addition, the sale to the ARC is taking place through a mechanism. transparent auction.
Chaudhuri also receives support from the banking community as he has been denied bail without any recourse to defend himself. The Association of Indian Banks (IBA), which represents the banking industry, has already approached the government. In fact, Chaudhuri’s arrest came at a time when the government has repeatedly assured bankers that they will be fully protected against good faith business decisions.
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