The Reserve Bank of India (RBI) is probing the role of three public sector banks (PSBs) ? United Bank of India (UBI), Punjab National Bank (PNB) and Indian Bank ? for allegedly flouting norms in providing bank guarantees of R2,000 crore to Nimbus Communications against an intangible collateral, adding a fresh twist to the ongoing legal wrangle between the Indian cricket board and its estranged telecast partner.
The central bank has written to the three banks asking why they provided guarantees against telecast rights which, according to banking regulations, cannot be treated as collateral for securing bank guarantees. The banks must respond by February 15.
Nimbus won rights to Indian cricket broadcast for four years in early 2010, its second consecutive four-year deal with the cricket board. The agreement was valued at approximately R2,000 crore for a minimum of 64 international matches and 312 days of domestic cricket until 2014, and therefore, Nimbus had to provide bank guarantees matching the value of rights. The cricket board terminated its contract in December 2011 on non-payment of dues and threatened to encash the guarantees. However, a clause in the contract ? which says the guarantee cannot be encashed if the contract ceased to exist ? prevented it from doing so. Still, the role of the banks has come under the RBI scanner. Nimbus has already paid around R1,200 crore to BCCI.
While officials at RBI confirmed the probe, director (communications) Alpana Killawala said: ?The RBI cannot comment on individual cases and banks.? Officials of PNB and Indian Bank did not comment despite repeated reminders, email queries, text messages and phone calls. However, a senior UBI official confirmed that the bank did receive the notice, adding it followed all guidelines before giving the guarantee. ?We gave guarantees against the estimates of revenues from domestic and international matches. They also had revenues on their books,? a senior UBI official said, requesting anonymity. ?We would revert to the RBI notice maintaining our stand that the bank did regular business with Nimbus without any mala fide motive,? he said.
Sources said banks adopted the same model for providing bank guarantees to Nimbus in its earlier contract with BCCI too (2006-2010). Both BCCI and Nimbus assured banks of healthy returns from advertising revenue based on the huge popularity of cricket in India.
When contacted, Nimbus officials declined comment, citing the ongoing arbitration. ?Two specific commitments in the BCCI contract were not honoured by the cricket board. One: There will be India-Pakistan series of five ODIs, three test matches and two T20 before April 2010. And second, the Indian team will field its best players in every home series. As a direct fallout, TV ratings of recent England and West Indies tour plummeted, impacting revenues,? a source in Nimbus told FE.
Meanwhile, Nimbus is said to have claimed R600 crore in damages from BCCI for failing to honour this part of the agreement.
?Even the bank guarantee from banks against telecast rights was given to us in writing by the BCCI. We followed what was dictated by the BCCI. This was same case in the previous contract too,? the source quoted above said. FE has further learnt that Nimbus has blamed the BCCI for not being serious about the falling popularity of cricket due to factors like bad performance and absence of key players. ?In last year or so, every home series saw up to 10% dip in ratings. BCCI was told about this but they did not do anything. No one in the market is ready to pay Rs 31.5 crore per match as telecast fees to BCCI. With Sahara also walking away from sponsorship (Rs 3.4 crore per match), it is high time BCCI woke up and took the onus,? a senior executive of a leading sports channel said.