MC Explains | The Rs 4,760-crore GTL bank fraud: All that you need to know

CBI (Representative image)

The Central Bureau of Investigation (CBI) has registered a case against GTL Ltd, some unknown bankers and directors for allegedly defrauding a consortium of banks of Rs 4,760 crore by creating an array of shell firms to divert money.

As per the central probe agency, the company fraudulently obtained loans from a consortium of more than 20 lenders and siphoned off the majority of the advance in conspiracy with vendors and some bank officials.
For those who aren’t familiar with the details of the case, here’s an explainer:

To begin with, what is GTL?

GTL was incorporated on December 23, 1987, as a private limited company and was converted into a public limited company on September 12, 1991. It is engaged in providing telecom network services, operations and maintenance services, professional services, network planning and design services and energy management services to telecom operators in India and international markets. Manoj Tirodkar and Global Holding Corporation Pvt Ltd are the promoters of the company.

What is the case?

The case pertains to a bank loan fraud that allegedly took place between 2009 and 2012. According to the CBI, GTL illegally obtained a number of credit facilities from the consortium of banks and then conspired with its vendors and some bank officers to divert the majority of the loan amount.

Who are the lenders to GTL, and what is the total exposure?

GTL has borrowed from a consortium of 24 lenders including Canara Bank, Dena Bank and ICICI Bank. The total loan exposure is around Rs 4,760 crore, according to the CBI first information report (FIR).

What is the CBI’s finding about the nature of fraud?

The company obtained short-term loans for certain business activities by misrepresenting that all such advances would be utilised for the stated purpose. But the bulk of the loan amount was not utilised for the said purposes and was later were routed back to GTL.

What are legal experts saying?

Sonam Chandwani, managing partner, KS Legal & Associates, said, “It seems inconceivable that such a large sum was involved and directors were unaware of such fraudulent activity taking place under their watch," Chandwani said.

What was the Reserve Bank of India’s red flag?

In a letter dated April 1, 2016, the Reserve Bank of India (RBI) urged IDBI Bank, one of GTL's lenders, to flag the company and launch a forensic audit. However, the CBI FIR reveals that two months later, IDBI Bank reacted on behalf of the consortium and advised against designating the account as a red flag and against appointing a forensic auditor because doing so might delay repayment of the debt. Further investigations found that the RBI had in a letter dated July 15, 2016, again instructed IDBI Bank to follow the instructions in its prior letter. It was after this that the forensic audit of GTL was assigned to chartered accountancy firm NBS and Co.