Mr Gautam Adani who become the second-richest man due to the support of Mr Narendra Damodardas Modi (See Random Reflections – Why boycott Adani) is in deep trouble. Almost every bank in the country has financed his companies, both listed and non-listed.
The Watergate scandal brought down Nixon. Harold Macmillan the Prime Minister of the UK had to resign due to allegations and more recently in Sri Lanka Gotabhaya Rajapaksha resigned due to protests against his government. Lal Bahadur Shastri resigned as the Railway minister due to a railway accident in Andhra Pradesh, but Nehru refused to accept his resignation. But after 4 months there was another accident in Ariyalur in Tamilnadu and Shastri quit as the Railway Minister. TT Krishnamachari resigned as Finance Minister when LIC was accused of buying fraudulent shares of Companies owned by a businessman in Kolkata. K.D. Malviya resigned when accused of requesting a private firm to help a Congress candidate in the election.
With the scandal of Adani the Prime Minister may have to resign on moral grounds if Adani does not salvage his ship. Adani may join the list of Vijay Mallya, Mehar Chokshi, Nirav Modi, Jatin Mehta and others.
In Sept 2022 CreditSights, an arm of Fitch Ratings had warned about the Adani Group being heavily indebted. The People’s Commission on Public Sector and Public Services wrote a detailed letter to the RBI Governor and Board of Directors, a copy of which was also sent to the Managing Directors and Directors of the public sector banks. In short, the letter demanded the RBI to:
- Conduct an urgent Asset Quality Review for each bank, with special reference to large corporate groups and, where corporates have borrowed heavily, put a stop to any further borrowing by them from the banks
- Implement the RBI decision to have a ceiling of Rs 10,000 crores borrowing by an individual corporate group
- Increase lending to MSMEs, Agriculture, and disadvantaged sections of society with subsidies and the costs fully covered by the government through transparent budgetary transfers to compensate the banks
- Revoke the scheme of banks getting into co-lending arrangements with NBFCs
- Revisit the proposal to privatise any PSB in view of the risks that such privatisation still poses to the depositors.
Now the Hindenburg report has come out with so many accusations, questions and data on the Adani Group of companies. Adani Group has issued a rebuttal and Hindenburg has refuted it and said that a fraud is a fraud even when it is perpetrated by one of the wealthiest individuals in the world. It further stated that ‘India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.’
The stock market has reacted and the Adani Group’s shares have fallen drastically. Efforts are on to save the downfall and also save the IPO of the group for mobilizing Rs 20000 crores. Institutional investors are being pressurized to subscribe. It’s as irony that the man who claims to be one of the richest in the world finds it difficult to mobilise Rs 20000 crores.
Everyone with common sense will know that no company or individual can emerge as the world’s second or third richest with 1097.77% growth in 3 years without any malpractice. Government support alone cannot lead to such high growth. Definitely, government support was the foundation for Adani.
In September 2022 when Adani Group gave a 15-page reply to the CreditSights report in the Random Reflections titled. “Is the claim of Adani Group true? Who can clarify?” I had demanded that RBI should clarify it and warned that Adani may go the Anil Ambani way as Anil was once the world’s seventh richest. We also demanded that RBI should implement its own decision of 2017 that a ceiling of Rs10000 crore should be kept for corporate credit for 2019.
This is needed immediately as banks are lending at very cheap rates to corporates as per the RBI-BSR Data of September 2022. The report says 599 companies have been given loans above 100 crores at less than 5% Interest rate. 6243 companies with credit limit above Rs 100 crores have a loan limit of Rs.2493731 crores given at less than 8% interest. When loans above Rs.100 cr are given so cheap, education loan borrowers, housing loan borrowers, farmers and even SHG members pay more interest. RBI has to clarify and regulate interest rates, which is one of its mandates. RBI also has to audit and clarify whether these large loans are safe and secure.
It is also high time to evaluate the risk in co-lending, especially the deal of SBI with Adani Capital. While the loans given by the banks to the Adani Group are not so huge the RBI has to audit and clarify whether due diligence has been followed.
I would also like to clarify to the public that the loan outstanding to the Adani Group by banks (Rs 70000 to Rs 80000 Cr) is very small considering the total loan outstanding (Rs.134.4 trillion as on Sept 2022) in the banking system and in no way depositors will be affected. Similarly, LIC’s investment portfolio is huge (Rs 41 crores) and investment in the Adani Group will not affect LIC much.
However, considering the media reports, research reports and public debate, I demand that there should be a thorough enquiry by the RBI, SEBI, Enforcement Directorate and a Joint Parliamentary Committee or Judiciary.
It is high time to also appoint Officer Directors and Employee Directors in PSBs so that there is a watchdog on the board.
Who will fall, “Gautam or Narendra” will be known sooner or later.
Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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