ABG Shipyard fraud detected faster than average time in such cases: Nirmala Sitharaman

Finance Minister Nirmala Sitharaman said that the Opposition has put its foot on the proverbial axe by raising a hue and cry about the biggest banking fraud of ₹22,842 crore perpetrated on banks by ABG Shipyard, stressing that the account had turned into a non-performing asset (NPA) in November 2013 while the UPA was in power.

“The noises that are coming – that ‘Oh, this is the biggest Ghotaala (scam) in Prime Minister Modi’s time!’ Not at all, this was a loan given well prior to 2013, it had even become an NPA by 2013. So now, in Hindi you say that Apne pair pe kulhaadi (maarna) [to cut your own leg], that is exactly what is happening here,” she said.

The Central Bureau of Investigation (CBI) has registered a case against Gujarat-based ABG Shipyard and its directors for allegedly cheating 28 banks of ₹22,842 crore, in what is the biggest ever bank fraud taken up by the agency.

While it normally takes 52 to 56 months to detect such bank frauds, lesser time was taken to detect it and take action under the present government, the minister said, crediting the banks for detecting the fraud in the ABG Shipyard faster than the average time required in similar cases.

Ms. Sitharaman, who addressed the Reserve Bank of India board on Monday morning, was responding to a query on the alleged delay in filing a First Information Report (FIR) in the case and what this fraud means for the overall health of the banking system that was said to have been cleaned up.

“The long and short of all the noises that are coming from outside is if it is a pre-2013 (loan) and… I am sitting in the RBI premises, so I don’t want to talk too much of politics but I am sorry…They have created a noise, not realising that it is all them and we have taken lesser time to detect it, take action, CBI and NCLT … so action is happening here like it has happened for every other major bank default,” she asserted.

Assuring depositors that banks’ overall health has improved and they have turned around, Ms. Sitharaman recounted the sequence of events in the ABG Shipyard case after banks declared the account as an NPA in late 2013. The consortium of banks, led by those with large exposures such as the State Bank of India (SBI) and ICICI, had worked out a restructuring of the loan as is the due process for any stressed account, she said. 

“So from 2014 onwards, this process has been going on. However, overall, not just for this account, in general, for any account or its details, the element of fraud or element of any kind of letting down of banks, almost takes 52 to 54 months to be fully (detected). Therefore, in this particular case, when you are coming with that kind of commitment, actually I should say to the credit of the banks that they have taken lesser than what is normally the average time to detect these kind of frauds,” she pointed out. 

“Then a forensic audit was done, some Ernst & Young or that kind of firm had gone into the details, everything else was collected and handed over to the CBI in 2020 and in 2022, CBI has filed two cases. In the meanwhile, the whole thing has also gone to the NCLT (National Company Law Tribunal),” she said.