Mumbai/New Delhi: About 70 Indian companies and individuals are set to lose money kept with or owed to them by Kaupthing Bank HF, the largest bank in Iceland that collapsed in the 2008 global financial meltdown.
The list includes institutions such as state-run Bank of Baroda (BoB) and India’s largest software firm Tata Consultancy Services Ltd (TCS), and many individuals, mostly diamond merchants and non-resident Indian (NRI) businessmen.
Mint has reviewed the list, provided to the Indian government by Iceland authorities. Federal agencies are examining the transactions involved for possible misappropriations.
According to a senior official with one of the federal investigative agencies, the transactions are currently being examined to check whether they have anything to do with the flow of black money. The official did not want to be identified given the sensitivity of the issue.
“It’s not necessary that the deposits are proceeds of tax evasion or black money. But it is a bit intriguing that these individuals have investments in Iceland, a country which in last few years gained trust for banking secrecy,” the official said.
“We are doing due diligence on the creditors and their background. Most of them are NRIs, but a lot of them have varied interest in diamond trading.”
The value of these deposits, receivables or investments in local bonds, is estimated to be around $30 million (Rs 135 crore today).
In 2007, their value was around $55-60 million, but a steep fall in Icelandic króna (ISK)—the local currency—in the aftermath of the financial meltdown has sharply eroded the value.
The króna, which traded around 59 to the US dollar at the end of 2007, plummeted to 140 to the dollar shortly after the collapse of US investment bank Lehman Brothers Holdings Inc. that marked the beginning of the financial crisis.
The currency later recovered and is now trading at around 114 to the dollar.
Among the Indian creditors, the value of BoB’s exposure to Kaupthing Bank is now around $13.2 million ($6.6 million each in two accounts), according to the documents reviewed by Mint, and that of TCS is $18,641.22.
R.K. Bakshi, executive director of BoB, said the bank will have to assess what portion of its investments can be recovered following the settlement process.
“We are a very small creditor. We will have to see what portion of this money will return through some settlement,” Bakshi said.
A TCS spokesman said the company is a creditor of Kaupthing as it was providing some information technology services to the bank when the lender filed for bankruptcy.
“We continue to be a party to the credit recovery process and look forward to a settlement of the issue. Our exposure to the bank sector in Iceland is not significant,” the spokesman said.
Kaupthing Bank, which is currently in the midst of a winding up process, has called a creditors’ meeting on 13 April at Reykjavik, where the claims of the creditors will be considered for any possible settlement.
According to WikiLeaks, the total claims lodged with the bank following its bankruptcy add up to ISK 7.32 trillion.
As on 31 December 2010, Kaupthing Bank had total assets of ISK 1.19 trillion, out of which loans to and claims against credit institutions stood at ISK 213.29 billion while loans to customers were at ISK 279.25 billion.
The bank is now headed by a resolution committee.
Morgan Stanley is the financial adviser to the resolution committee, according to the bank’s website.
“The purpose of the (13 April) meeting is to continue discussions of the winding up committee’s recognition of claims in addition to give overview of disputes regarding decisions on claims,” according to the website.
After its collapse, Kaupthing Bank has been taken over by the Financial Supervisory Authority, Iceland. The bank had operations in 15 countries.
The Icelandic economy and its banking system plunged into a crisis after all three of the country’s banks found it close to impossible to refinance their short-term debt.
The collapse of the banking sector together with rapid depreciation of the Icelandic króna, brought about an unprecedented economic crisis.
Though Kaupthing Bank continues to have a full banking licence, its current operations are mostly limited to preserving its assets.
On 25 May 2009, the district court of Reykjavik had appointed a winding up committee for the bank.