Rs.758 crore fraud reported by IDBI Bank

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IDBI Bank Ltd. has finally declared the DHFL promoters and siblings – Kapil Wadhawan and Dheeraj Wadhawan – as ‘wilful defaulters’ in a Rs 758 crore unpaid loans case. The IDBI move came on February 27 against the Wadhawan brothers who are among the prime accused in what is billed as India’s biggest banking fraud till date, that came to light in February 2022.

The Union Bank of India, leader of a 17-bank consortium, including the IDBI Bank, had lodged a complaint against the DHFL, Wadhawan siblings and others who allegedly hatched a criminal conspiracy to defraud the banks of a staggering amount of around Rs 43,000 crore. Based on the UBI’s complaint, the Central Bureau of Investigation (CBI) had filed its FIR in June 2022 against the Wadhawans, DHFL and others.

Consortium Banks

Besides the UBI, the consortium included State Bank of India, Canara Bank, Bank of India, Punjab National Bank, Indian Bank, Bank of Baroda, IDBI Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, UCO Bank, Federal Bank, HDFC Bank, South Indian Bank and Karnataka Bank.

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Bank Fraud

The CBI had said that the plot by the accused Wadhawan brothers and others induced the consortium of banks, mostly PSUs, to release huge loans totalling to Rs 42,871.42 crore.

A significant portion of the loans was allegedly siphoned off or misappropriated by falsifying the DHFL’s books of accounts, dishonestly defaulting on the repayments to the lenders thereby causing a wrongful loss of Rs 34,615 crore. In July 2020 when the NPA (since October 2019) account of Wadhawans-DHFL was classified as a ‘fraud’, the IDBI Bank’s outstanding was stated as Rs 961.58 crore.

On the purported delays, official banking sources explained that the willful default examination proceedings had been initiated way back in October 2020, by issuing show cause notices to all concerned, as per the RBI rules.

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“However, the Wadhawan brothers were already in jail at that time and efforts were made to serve the show cause notices through the jail authorities, which took time,” claimed a top banker.

After giving them the full opportunities and following the process of two-stage intimation, the IDBI Bank had declared them as ‘wilful defaulters’ in November 2022, but the formal public proclamation came only after another almost four months (February 28, 2023).

The Wadhawan siblings were first accused in the cases registered by the CBI and Enforcement Directorate (ED) in the infamous Yes Bank fraud along with its founder-promoter Rana Kapoor and others.

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IDBI Report

As per the IDBI Bank’s annual report (2021-2022), a total of 245 cases – with an aggregate gross principal outstanding of Rs 44,652 crore, comprising standard assets/NPAs/technically written-off assets – were undergoing Corporate Insolvency Resolution Proceedings.

The bank said that it had resolved the majority of these cases to recover a sum of Rs 1,133 crore (2020-2021) and was hoping to resolve many more in the next fiscal (2021-2022).

Besides, 279 cases were classified as ‘willful defaulters’ with punitive actions initiated against them, and nine were declared as ‘non-cooperative borrowers’ till March 2021. The UBI’s complaint report stated that till July 31, 202, the SBI had the highest exposure to DHFL – a staggering Rs 9,898.76 crore – followed by the others.

DHFL had become a defaulter from May 2019 and the banks classified it as a NPA between October -December 2019, and then declared as ‘frauds’ from March 2020 onwards.

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