Challenges of Consortium Lending-The Case of Bhushan Steel
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Code : FCF0024
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Region : India
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INTRODUCTION: On August 3, 2014, Bhushan Steel Limited (BSL) made it to the news for all the wrong reasons when its Vice Chairman and Managing Director, Neeraj Singal (Singal), was arrested by the Central Bureau of Investigation (CBI) for allegedly offering a bribe of Rs. 5 million to Sudhir Kumar Jain (Jain), chairman and managing director (CMD) of Syndicate Bank, a public sector bank. Jain was also arrested for allegedly accepting the bribe.A group of commercial banks and financial institutions led by Punjab National Bank (PNB) had a combined exposure of Rs. 400 billion approximately to BSL in the form of term loan (Capital expenditure) and working capital finance. The company reported a huge loss during the financial year 2015. The falling business of the company and the bribe-for-loan scandal involving the company’s vice chairman, prompted State Bank of India (SBI), one of the joint lenders to the company, to suggest appointment of a third party management agency to monitor its operations. But for this proposal to be adopted there was a need for a consensus among the joint lenders. The lending banks, which were already struggling to cope with mounting stressed assets, debated among themselves on how to deal with their exposure to BSL |
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