SBI defends $1bn Adani loan against 'crony capitalism' charge
21 November 2014
Defending its decision to extend a $1 billion (Rs6,200 crore) loan to Adani Mining for its Australian coal project, the government-owned State Bank of India on Thursday said it will do "proper due diligence" before sanctioning the loan to the Gautam Adani-owned company.
Arundhati Bhattacharya, chairman of the country's largest lender, clarified that the bank has presently only entered into a memorandum of understanding (MoU) with the group and that funds would only be released after conducting a series of checks on the project.
"It will go through proper due diligence both on the credit side as well as on the viability side. So, all of that will be done," Bhattacharya said. "The board will take a call and then only the loan will be sanctioned."
Her statements came in response to allegations by the opposition Congress that the BJP government was indulging in ''crony capitalism'' - the very charge that was frequently levelled against the Congress-led UPA government when it was in power.
The Congress asked if the State Bank of India had done the due diligence before extending the massive loan to the Adani group for development of a coal mine and associated rail project in Australia, wondering about Prime Minister Narendra Modi's "keen interest" in the issue.
All-India Congress Committee general secretary Ajay Maken told a specially convened press conference, "What was the propriety of the SBI giving the loan to Adani, who was sitting next to the PM during Modi's visit to Australia, at a time when five foreign banks have denied credit to the group for the project?"
Maken said the PM appeared to be "promoting" Adani in securing the loan during a meeting in Australia for which the SBI chairman too had been called. He asked why was the SBI not making public the MoU signed with the Adani group for the project that would put in the public domain the conditions and liabilities agreed to for the loan.
The SBI loan will finance Adani's $7 billion coal mine, rail and port project in Queensland, Australia and is slated to be Australia's largest coal mining venture at a time the country is struggling to cope with the loss of over 4,000 jobs in the sector. . (See: After Queensland nod, Adani lines up $1 bn from SBI for coal project )