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Banks' NPAs to rise by Rs 80 bn in Q4 on account of Gitanjali Gems

Till December 2017, the loans to Gitanjali Gems were standard and regular debt servicing was being done

Press Trust of India  |  New Delhi 

Gitanjali Gems

(NPAs) or bad loans in the banking sector are set to shoot up by at least Rs 80 billion as advances to the scam-hit group have turned bad during the quarter ended March 31.

will have to make provisioning of Rs 80 billion for Gitanjali alone as there has been no servicing of the working capital loan during the fourth quarter of last fiscal, sources said.

Gitanjali, among others, is the major account which has turned bad in the fourth quarter of 2017-18.

Gross of all the in the country amounted to Rs 8409.58 billion in December, led by industry loans followed by services and agriculture sectors, as per the government estimates.

Gitanjali is promoted by Mehul Choksi, uncle of billionaire diamantaire Nirav Modi, who defrauded Punjab National Bank (PNB) of over Rs 130 billion by getting fake Letters of Undertaking/Credit (LoU/LoCs) issued from one of the bank's branches in Mumbai.

A special CBI court in Mumbai has issued non-bailable warrants (NBWs) against Modi as well as Choksi.

A consortium of 21 led by Allahabad Bank had first extended working capital loan to it in 2010-11. In 2014, became the lead banker as it had highest exposure of about Rs 9 billion and in line with the revised guidelines of the Reserve Bank of India.

Till December 2017, the loans to were standard and regular debt servicing was being done. There is no servicing of debt in the last quarter ended March 31, so it has to be declared NPA by all banks, said a senior bank official of the consortium.

In 2015, the consortium had restructured working capital loans given to Gitanjali under the joint lenders' forum (JLF) mechanism.

The Gitanjali exposure was classified as a special mention account-2 (SMA-2) in 2014 after the company failed to fulfil its payment obligations for more than 60 days, triggering the formation of a JLF.

As a result, the company announced the consolidation of the business at the group level to improve cash flows and reduce costs in various activities such as sourcing, manufacturing, distribution, exporting and retailing.

It proposed the merger of three of its subsidiaries and with and also the merger of Gitanjali Jewellery Retail and with GILI India.

Different investigating agencies, including CBI, I-T and Enforcement Directorate, are probing the fraud, which came to light in January, dubbed as the biggest banking scam in the country.

PNB had issued as many as 1,590 to Modi, Choksi and their associates.

The total number of issued to the companies of Modi, his relatives and the Group are 1,213, while those to Choksi, his relatives and the Gitanjali Group are 377.

First Published: Sun, April 15 2018. 13:39 IST