Tuesday, May 11

SBI chief to ED/CBI:Keep off companies under IBC, go after promoters

Mumbai: State Bank chairman Rajnish Kumar on Tuesday said the Enforcement Directorate and other central law enforcement agencies should restrict
to attaching personal assets while investigating a promoter and keep
off the company which is
under the insolvency process.

Speaking a day
after NCLAT asked the ED
to release the attached properties of Bhushan Power & Steel which is being taken over by JSW Steel, Kumar asserted the lenders’ first right of taking charge of an asset of its bank-financed and said no one should dispute the same.

“Any action which ED or any other central authority has
to take, they can take with the existing
promoters and attach their personal assets leaving their companies away,” he said, speaking at a Bloomberg event here.

Kumar said the agencies should follow this rule especially in case of companies which are undergoing bankruptcy process, as new suitors are “not fools”
to risk their money.

“The person acquiring a company cannot be subjected
to any harassment by any agencies and I am sure that will be guaranteed now,” Kumar said, adding as per the spirit of the bankruptcy code, an acquirer needs a “clean asset”.

It can be noted that over the weekend ED had attached assets worth Rs 4,025 crore while probing money laundering linked
to an alleged bank loan fraud against the BPSL
promoters. This was challenged by JSW Steel at the NCLAT, which on Monday had slammed the ED, saying the bankruptcy code would fail if the agency functioned like this and ordered the property be released. JSW Steel had won the bid
to buy company for Rs 19,700 crore.

Kumar said the Supreme Court judgment on Essar Steel should address much of the worries which are leading
to legal tangles in the nascent bankruptcy laws.

He said there will not be any more consolidations once the number of state-run lenders gets down
to 12, and private sector lenders should also acquire smaller rivals.

Meanwhile, Kumar also said since public private partnership model has not succeeded, a new model needs
to emerge and the government cannot continue
to take the financial burden on projects.

If required, we bankers should be willing
to take pains in the short-term as a new model emerges, he added.

“I am not saying all was well or is well with the behaviour of
promoters. There are issues and they are coming out. Take a large power plant for instance. We need a promoter with means
to put it and run it. How many
promoters are left with the capability
to bring in equity and invest today?”

He said large companies and those big mid-size ones have utilised only 31 percent of their working capital limits, while smaller companies have utilised 70 percent.

There has been a 15 percent increase in term loans for the bank on a year-on-year basis, as there is lot of appetite for credit, he said.

On the PMC Bank scam, Kumar said while cooperatives are needed and have offered good services
to customers over time, governance issues dog them.

He said
SBI has built a book of Rs 10,000 crore in unsecured personal loans through its digital platform in the last five months, and denied it being the next bubble, saying delinquency rates in those are as low as 0.01 percentage points.

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