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Congress Asks RBI To Step In SBI Buying Shares in Defaulter Supreme Infrastructure
Moneylife Digital Team 24 September 2024
Economy & Nation
Sharing a Moneylife report on X, Jairam Ramesh, Congress party's general secretary in-charge of communication has urged Reserve Bank of India (RBI) to step in and examine State Bank of India (SBI)'s decision to convert its outstanding debt into equity in Supreme Infrastructure India Ltd (SIIL). 
 
While slamming SBI's decision to convert its outstanding debt into equity in SIIL, Mr Ramesh says, "This arrangement creates a dangerous precedent in India's corporate debt landscape as it encourages other defaulting companies to seek similar deals, where they can retain control and value even after significant defaults."
 
Mr Ramesh then goes on to quote from Moneylife's report about SBI aligning itself with the interests of the defaulting borrower, SIIL, rather than prioritizing the recovery of public funds.  
 
 
The report published by Moneylife about SBI's controversial decision to invest in SIIL has created an uproar on social media. 
 
Karan Bir Singh (KBS) Sidhu, an officer from the Indian Administrative Service (IAS) cadre (1984 batch), also raised questions about SBI investment in SIIL. In a post on X, he says, "Despite writing off 93% of its loans to SIIL, SBI is now planning to invest Rs100 crore to acquire a 20% stake in the company. This decision comes after SIIL's debt resolution plan was approved by the national company law tribunal (NCLT). The article raises questions about the wisdom of this investment, given SIIL's history of defaulting on loans and its poor financial performance."
 
The comments on social media underscore the growing sensitivity surrounding the handling of corporate debt and the role of public sector banks (PSBs) in these processes.
 
The call for RBI intervention by a major political party adds a new dimension to this controversy. It increases the likelihood of regulatory scrutiny and potentially paves the way for legislative discussions on the broader issue of corporate debt resolution in India. Should RBI choose to examine SBI's decision-making process in this matter, it could lead to a review of the current guidelines for debt-to-equity conversions in distressed companies, stricter oversight of public sector banks' involvement in corporate debt restructuring and potential new regulations to prevent similar situations in the future.
 
This political attention also brings into sharp focus the issue of corporate governance within PSBs and companies receiving favourable debt restructuring terms. Questions are likely to be raised about the independence of bank boards in making such decisions, the role of government influence in public sector bank operations and the accountability mechanisms in place for both lenders and borrowers in debt restructuring scenarios.
 
The SBI-SIIL case, amplified by political intervention, may become a watershed moment in India's approach to handling corporate debt and public sector bank management. 
As the situation continues to unfold, it is likely to spark a broader national debate on the autonomy of public sector banks, the effectiveness of India's insolvency and bankruptcy framework, the balance between supporting struggling businesses and protecting public financial interests and the need for more transparent and equitable debt resolution mechanisms.
 
As political pressure mounts and regulatory scrutiny intensifies, all stakeholders in India's financial ecosystem will be watching closely. The resolution of this controversy could potentially reshape the landscape of corporate debt management in India for years to come.
 
Comments
rameshjrdhr5
1 week ago
I hoped that the SBI - SIIL issue will exposed the nexus between PSB supremos and IBC machanism, the irresponsibility of PSB officials and the money making opportunity given to them through IBC process. Throughout history, the PSBs destroy taxpayers money and inculcate the culture of fraud and dishonesty among big corporate. It's time to rethink about the future of PSBs and the capacity and credibility of govt running a bank.
Reply
Meenal Mamdani
1 week ago
It is high time that such a scrutiny is conducted.
SEC and SBI are obviously getting instructions from the politicians who want to maintain their grip on the financial institutions.
I would worry even about RBI as Shaktikanta Das is a Modi appointee after the previous two chiefs left or were chased out during the demonetization fiasco.
So far Mr Das has shown integrity but will he bend to the will of the political party at the Center?
Reply
jpkacker
Replied to Meenal Mamdani comment 1 week ago
Our deposit by public is safe in SBI after the action or not,
Reply
jpkacker
Replied to jpkacker comment 1 week ago
We hope strong foundation of SBi and our confidence on one of leading ??????
Reply
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