Mumbai: Concerned about the recent bribe-for-loan scam which has led to the arrests of top executives of Bhushan Steel Ltd and Syndicate Bank, all lenders to the steel maker have stepped in to protect their exposure of about 40,000 crore.

A consortium of 51 lenders to Bhushan Steel may meet next week to try to put in place a management agency to oversee the day-to-day running of the company, bank officials said on Friday at State Bank of India’s (SBI’s) first quarter results press conference.

“We are working with Punjab National Bank (PNB) to call a consortium meeting soon," said Arundhati Bhattacharya, chief of SBI. PNB is the consortium leader.

SBI’s exposure to the company is about 6,000 crore, Bhattacharya said.

On Thursday, the Central Bureau of Investigation (CBI) arrested Neeraj Singhal, vice-chairman of Bhushan Steel, and on Saturday, it arrested Syndicate Bank’s chairman S.K. Jain for allegedly taking a bribe of 50 lakh for increasing the credit limit of some companies in violation of banking rules.

Bhushan Steel, the sixth largest Indian steel maker by capacity, produces about 2.2 million tonnes (mt) of mostly flat steel products with plants in Uttar Pradesh, Odisha and Maharashtra. The company, which is a prominent supplier of automotive body sheets, has a major expansion taking place in Odisha that would take its total installed capacity to 4.7mt, according to a CARE Ratings report dated 6 August.

“Bhushan Steel’s vice-chairman and managing director Mr Neeraj Singhal has been named in a case registered by CBI in relation with extension of credit facilities by Syndicate Bank to the company. In view of the above development and the possible impact of the same on the credit risk profile of the company, CARE has placed the ratings on ‘Credit Watch’," the CARE report said.

“CARE is in discussion with the company on the above developments and would take necessary action when greater clarity emerges," the report added.

The management agency of the lenders would focus on the Odisha unit of Bhushan Steel in Dhenkanal where a fatal accident put the spotlight on the plant’s functioning.

“We are planning to appoint a management agency to oversee the day-to-day running of the unit (in Odisha)." SBI’s Bhattacharya said.

Last November, when the plant caught fire, the lenders had advised the management to appoint a safety advisor and take all precautionary measures to avoid a repeat of the incident.

However, SBI is not worried about its exposure to the company as it is a “good quality asset" for the bank, Bhattacharya added. The reason for putting the management agency is that the lenders “don’t want the unit to get into any kind of trouble or create trouble for others (lenders)," she said.

The bankers are not trying to change the management as “it is not so easy," she said.

On the sidelines of the meeting, a senior SBI official said the management consultant could be Alvarez and Marsal.

Shares of Bhushan Steel closed on the BSE at 219.35, down 9.99% from the previous close. Since last Friday, before the problem came to light, the shares have fallen 44.45%.

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