news Wednesday, February 25, 2015 - 05:30

The News Minute| November 18, 2014| 8.00 pm IST

The story appeared in the Deccan Chronicle, in Times of India and later in the First Post. All made the same point. They said Y.S. Chowdary, TDP leader who had just been inducted into the cabinet as Minister of State for Science & Technology and Earth Sciences, ran a company Sujana Towers that was a loan defaulter and had not paid interests to Central Bank of India for a loan of Rs 316 crores.

The allegations were dismissed both by Union Finance Minister Arun Jaitley and the Sujana Group which issued the following clarification.

“The group has been dealing with more than 15 banks for several years with satisfactory dealings. The group in its 27 years’ history (has) never approached banks with requests for waivers and write-offs.” The Finance Minister said one of Chowdary’s companies’ was making losses, the bank restructured it and he is paying back all the installments. “These are cases arising out of political agitations, not cases out of some crime,” Mr. Jaitley said. 

Documents available with The News Minute (TNM) show that Sujana owed a total of more than Rs. 130 crores to the bank on November 7th 2014 two days before the cabinet reshuffle of November 9th. 

The bank document from 17 November 2014 still classifies Sujana Towers as an NPA account.

The document shows the comoany has not paid overdraft amount due for the months of July, August, September and October 2014.

It is not uncommon for banks to restructure NPAs, neither is it rare for them to offer incentives for defaulting companies to pay up as no banks will say no to money. 

Mr. Chowdary may have benefited from some remarkably swift foot-work and a tail-wind to restructure everything in time for the swearing in ceremony on the 9th. But, at the time of writing, sources have told TNM the loan has not been restructured and none of the standard operating procedures to undertake the exercise have begun. 

Even if Sujana Towers’ account was restructured at an earlier stage, it is evident that the company is a loan defaulter even now.Scan Copy

As the allegations played out in India, the Mauritius Commercial Bank Ltd has approached the Hyderabad court asking it to wind up Sujana Universal, another company promoted by the minister on grounds that the company defaulted on Rs. 92 crore loan it availed through its subsidiary. A liquidator has been appointed to prevent the management of the company from selling the firm’s assets. 

Firstpost reported that according to a list published by the All India Bank Employees’ Association (AIBEA) of 400 top bank loan defaulters of India’s state-run banks as on 31 March 2013, both companies in the Sujana group together had defaulted loans worth Rs 920 crore to two public sector banks, Central Bank of India and Bank of India. Besides the two companies, the Sujana group also runs another company — Sujana Metal Products. 

The report also says that for financial year ended March 2014, Sujana Metals posted a loss of Rs 38 crore, Sujana Universal a loss of Rs 6.3 crore and Sujana Towers logged a net profit of Rs 1.8 crore.

Many companies undergo losses, as the Finance Minister pointed out. But it is of concern when people with political muscle are welcomed by nationalised banks, loans doled out to them and they can continue as defaulter.

The question on everyone’s mind is – why do successive government’s use public sector banks to take risks that no amount of creative math can justify?

Eyebrows are also being raised over support from the State Bank of India (SBI) and an Australian state that Adani Enterprises has received to help it build a $7 billion coal mine running contrary to news from the coal sector where prices have slumped to their lowest in five years. A Memorandum of Understanding (MOU) was signed during the Prime Minister’s recent visit to down under for a loan of $1 billion from the SBI for a rail, port and mine project that is to be ready by the end of 2017.

It is important to recall what former Comptroller and Accountant General (CAG) Vinod Rai had had outlined in an interview to The Hindu last September where he explained how “crony capitalism” had perfected the public sector bank route. 

Commenting on industrialist Vijay Mallya’s antics, Rai had said the Kingfisher Airlines’ loan default is just a trickle and the overall problem of bad loans was endemic as cronies used their connections to swing loans. He told the daily the cronies had neither the domain knowledge nor the financial strength to deliver and relied heavily on public sector lenders “that are prone to manipulation.”

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