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2G Scam | Government seeks banks’ telecom exposure details

2G Scam | Government seeks banks’ telecom exposure details
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First Published: Mon, Feb 28 2011. 12 22 AM IST
Updated: Mon, Feb 28 2011. 12 22 AM IST
Mumbai: The government has asked state-run banks to provide details about loans given to telecom companies to pay for second-generation (2G) mobile licences they got in 2008, even as investigations continue into alleged wrongdoing in the allocation of spectrum.
The finance ministry’s department of financial services has asked the Indian Banks’ Association (IBA), the national lobby group, to furnish all details of banks lending to telcos since 2008, according to a person familiar with the development. Mint has reviewed a copy of the letter, dated 23 February.
This is part of the ongoing examination by the public accounts committee (PAC), a parliamentary audit panel, into the alleged irregularities, the person added.
“The finance ministry wants the loan details of individual banks to the telecom companies following the mention of the Comptroller and Auditor General (CAG) about these loans in its report (on 2G allocation),” the person said. “These details will be sent to PAC, which is currently examining the issue.” He declined to be named because of the sensitivity of the issue.
The government also wants to know whether state-run banks have violated norms while lending to telecom companies that received the spectrum, the person said.
The finance ministry has thus far maintained that there is no evidence of irregularities in bank loan disbursals to telecom companies.
The finance ministry intervention comes on the heels of the Central Bureau of Investigation (CBI) discovering that some state-owned banks may have bypassed rules when they loaned funds to telecom companies to pay 2G prices.
CBI’s banking fraud cell has registered a preliminary inquiry report against unknown bank officials for giving term loans to the erstwhile Unitech Wireless Ltd after allegedly finding that the money may have been routed to other group firms, Mint reported on 21 February. The company denied any wrongdoing, said all processes had been followed and that the money had been repaid.
It is also examining loans given to Swan Telecom Pvt. Ltd (now known as Etisalat DB Telecom India Pvt. Ltd). Swan did not reply to queries sent on the matter last week.
The 2G controversy has cost A. Raja his job as the telecom minister and has forced the government to give in to the opposition’s demand for a joint parliamentary committee (JPC) to probe the matter.
In November, the government’s auditor, CAG, said in a report that the award of spectrum at below-market rates during this allotment and previous ones may have caused the exchequer a notional loss of around Rs1.76 trillion.
CBI has arrested Raja, former telecom secretary Siddharth Behura and Shahid Balwa, managing director of DB Realty Ltd and one of the promoters of Swan Telecom.
It has also questioned many industrialists, including Anil Ambani of Reliance Group.
State-run banks lent at least Rs2,500 crore to Unitech and more than Rs700 crore to Swan Telecom during the 2G allocation process in 2008-2010 and subsequently for the roll-out of services.
Overall, they offered around Rs14,000 crore in the form of short-term, working capital loans and bank guarantees to five new entrants who were allocated 2G licences.
This number could not be independently verified as banks were unwilling to speak about the specifics of their exposure.
State Bank of India, the nation’s largest lender, has given around Rs10,000 crore to the five new telcos that received 2G licences. Punjab National Bank has given around Rs330 crore and IDBI Bank Ltd around Rs1,000 crore, according to rough estimates provided by bank officials.
The head of a south India-based public sector bank ruled out any concerns as all loans to phone companies following the 2008 spectrum allocation complied with rules.
“Banks have followed all norms while lending to such firms. Besides, any bank will be interested to give loans against licences issued by government. Why should one be concerned?” the official asked. He did not want to be named as the issue is currently being investigated.
While the banks don’t carry much of a risk on loans to telecom companies as the money involved is relatively low, the controversy could hit their stocks, said Abhishek Kothari, research analyst with Mumbai-based Way2Wealth Brokers Pvt. Ltd.
Since January, the Bombay Stock Exchange bellwether equity index, the Sensex, has fallen 13.7% and Bankex, the index of leading listed banks, has dropped 11.6%.
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First Published: Mon, Feb 28 2011. 12 22 AM IST