BoR takes action against unruly defaulters
Praveen Chandran
13 July 2002

Mumbai: Bank of Rajasthan (BoR) has initiated strong actions against all its recalcitrant defaulters, including the Bangur group, for recovery of dues.

The bank management has filed criminal and civil cases in various courts and debt recovery tribunals against the defaulters and has started taking over the management control of the corporate defaulters, on a war footing.

The first victim was Rajasthan Breweries Ltd (RBT). The bank has taken over the management control of RBT and invited tenders to sell or lease out the business of the defaulter. RBT owes around Rs 16 crore to BoR.

BoR chairman Pravin Kumar Tayal says: “We have taken over the management control of RBT. We will continue similar kind of action against all our defaulters.”

BoR’s move is based on the recent powers given by the finance ministry to the banks under a new ordinance called Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002.

The ordinance gives banks sweeping powers to tackle defaulters. The banks can now change or take over the management, supersede the board of the company, sell or lease out the business of the defaulting borrowers, and take possessions of the secured assets. BoR has also filed 185 cases against the Bangurs, the former promoters of the bank, in New Delhi, Jaipur and Kolkata for recovery of dues.

Currently various other options are being explored by BoR to recover the dues from the Bangur group, including attaching the group’s properties and taking possession of assets, such as securities owned by the Bangurs.

Tayal says the Reserve Bank of India (RBI) has asked BoR to check all the legal aspects of the action against the Bangurs. BoR sources say the Bangur group owes around Rs 3 billion to the bank, which were advanced as loans. Taking into account the interest over the last seven years, the Bangurs have to pay over Rs 6 billion.

In its communication to BoR, the sources say, the RBI has stressed recovering the amount from the Bangur group. “The bank’s efforts in recovery of non-performing assets (NPAs), in particular from the Bangur group, are far from satisfactory, jeopardising the financial position of the bank,” says the RBI.

The RBI has also directed BoR to place the letter before the board of directors “for initiating appropriate measures urgently.” It demanded that “the progress in initiating criminal proceedings, particularly against the Bangur group of companies, be intimated” to the central bank periodically.

Tayal says from the financial year 1999-2000 to 2001-02, the bank had recovered Rs 1.5 billion from its major corporate defaulters.

The RBI move did not surprise the banking industry because the central bank was not happy with the way the Bangurs ran BoR. The present management of the Tayals had the RBI’s support to take over BoR. For 2001-2002, the bank had set a target of recovering Rs 70 crore in NPAs from corporate borrowers, but was able to recover just Rs 25 crore.

List of reports on Bank of Rajasthan

List of reports on Rajasthan Breweries Ltd

List of reports on Bangur group