2024-09-24 12:47:23 :
The Indian National Congress (INC/Congress) on September 24 sounded the alarm over State Bank of India’s (SBI) choice to convert its outstanding debt in India’s Supreme Infrastructure Limited (IIL) into equity.
Congress secretary-general for communications Jairam Ramesh posted on social media platform X (formerly known as Twitter) urging the Reserve Bank of India (RBI) to intervene and review the SBI’s decision.
He shared images of media reports that said SBI would play a dual role in the debt restructuring of defaulter SIIL and transform itself from a major creditor to an equity shareholder in the troubled company.
What did Jairam Ramesh post?
“In an extraordinary move, SBI has decided to convert its outstanding debt into equity stake in Supreme Infrastructure India Limited (SIIL), which has declared bankruptcy. Lenders, including SBI, reduced the debt by 93.45%. This arrangement sets a dangerous precedent in India’s corporate debt landscape,” Ramesh wrote.
He listed the “dangers” of such a situation, saying it would “encourage other defaulting companies to seek similar deals that would allow them to retain control and value even after a major default.”
Adding: “This raises questions about the effectiveness of India’s insolvency resolution framework and the role of public sector banks in managing NPAs. SBI appears to be aligning the interests of defaulted borrowers (SIILs) rather than prioritizing recovery public funds.”
He asked the RBI to “step in and check” the RBI process, adding, “There is an urgent need to ensure that public sector banks maintain strict discipline in their approach to debt resolution and avoid creating moral hazard in the financial system. Such debt restructuring “The unusual nature of the investment requires immediate regulatory review. The Reserve Bank of India (RBI) needs to step in and review SBI’s decision-making process in this matter.”
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