State-run Uco Bank, which leads a consortium of lenders to Basmati rice exporter REI Agro, has filed a recovery suit in the debt-recovery tribunal (DRT) on behalf of the group banksto recover unpaid debt.
The 20-lender consortium has earlier alleged that the company had defrauded it to the extent of R3,815 crore since 2013 through conspiracy, cheating and forgery.
After instruction from the Reserve Bank of India (RBI), the lenders had declared the company’s account a fraud and sent the report to the Central Bureau of Investigation (CBI). On the basis of the complaint, the central investigating agency registered a case against REI Agro and conducted searches at four of its premises and its directors last month.
Concerned over the huge unpaid debt, the leader of the lender consortium has moved the DRT.
“Recovery action is initiated. We have filed a case against Rei Agro on behalf of the consortium to recover the amount,” a senior executive of Uco Bank told FE on condition of anonymity.
“As a leader of the consortium, it was Uco Bank’s responsibility to file a recovery suit in DRT after the banks declared the company a fraud. Now, as the lead bank has filed a suit, other banks of the group need not to file separate suits if they had lent only through the consortium,” said a senior official of a PSU bank, which is one of the consortium members.
“For us the recovery is important,” the official, who wished not to be named, said.
According to him, Rei Agro is not a ‘fit case’ for strategic debt restructuring (SDR) as CBI has already registered a case against the loss-making company over the alleged malpractices. “Who will come and invest into the company, which has been declared as fraud and is under CBI scanner? If anyone infuses fresh equity into the company, he would be answerable to the CBI,” he pointed out.
Corporation Bank is reportedly planning to write off a R532 crore loan given to REI Agro in the December quarter after making full provisions. The bank’s chairman and managing director SR Bansal has said the lender had already categorised the account as fraud and was making provisions for it.
“Once an account is declared as fraud, all the lenders withing the consortium have to make provisions for it within four quarters. After the that a lender can write off the loan amount or carry forward the account…it is a choice of individual banks. If a bank decides to write off the amount, then its NPAs come down,” the banker cited above explained.
Significantly, last year the lender consortium set up a joint lenders’ forum (JLF) to work out a corrective action plan for the financially stressed Basmati rice exporter. The company had defaulted on its payment to certain lenders, following which United Bank of India filed a winding up petition against the company for non-payments of R224 crore outstanding dues.