New Delhi: The Congress on Tuesday slammed the SBI's reported decision to convert its outstanding debt into equity in Supreme Infrastructure India Limited (SIIL), urging the Reserve Bank of India to step in and examine SBI's decision-making process in this matter.
Congress general secretary in-charge communications Jairam Ramesh shared on X a media report which claimed that the State Bank of India (SBI) will take a dual role in the debt restructuring of defaulter SIIL with the country's largest public sector bank transitioning from being SIIL's primary creditor to becoming an equity stakeholder.
"In an extraordinary move, the SBI has decided to convert its outstanding debt into equity in Supreme Infrastructure India Limited (SIIL), a firm that declared bankruptcy. The lendors, including SBI, took a 93.45% haircut on the debt," Ramesh said on X.
"This arrangement creates a dangerous precedent in India's corporate debt landscape - it encourages other defaulting companies to seek similar deals, where they can retain control and value even after significant defaults," the Congress general secretary said.
It raises questions about the effectiveness of India's insolvency resolution framework and the role of public sector banks in managing distressed assets, Ramesh said.
The SBI appears to be aligning itself with the interests of the defaulting borrower (SIIL) rather than prioritizing the recovery of public funds, he said.
Ramesh stressed that there is a pressing need to ensure that public sector banks maintain strict discipline in their approach to debt resolution and avoid creating moral hazards in the financial system.
The unusual nature of this debt restructuring and equity investment calls for immediate regulatory scrutiny, he said.
"The Reserve Bank of India (RBI) needs to step in and examine SBI's decision-making process in this matter," Ramesh said.
Published 24 September 2024, 07:17 IST