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$1.2B Loans To Gitanjali Now To Be Declared Bad By 21-Bank Consortium

Gitanjali Group principal Mehul Choksi

The non-performing assets (NPAs) or bad loans in the Indian banking industry are likely to rocket by at least ₹8,000 crore ($1.2 billion), as this amount has to now be set aside for the loans to the Gitanjali Gems group, which turned bad in the fourth quarter of fiscal 2017-18, according to news agency reports.

The country’s banks had together, a total of ₹840,958 crore ($128.54 billion) in NPAs in December 2017. Government estimates have put loans to industry among the top of these NPAs, followed by lending to services and the agricultural sector, in that order.

A consortium of 21 banks led by Allahabad Bank had made working-capital loans to Gitanjali Gems in 2010-11. In 2014, with an exposure of ₹900 crore ($137.6 million), ICICI Bank became the lead bank of the consortium. That year, Gitanjali failed to meet its repayment obligations for more than 60 days, triggering off a mechanism known as the joint lenders forum (JLF), which restructured the loans. Gitanjali in turn agreed to consolidate many of its business groups and improve cash flows.

Gitanjali proposed the merger of the former De Beers Asmi and Nakshatra jewellery brands with its Spectrum Jewellery brand. Gitanjali Jewellery Retail and Gitanjali Lifestyle were also set to be merged with the Gili brand.

Debt servicing was regular until December 2017, when the Punjab National Bank (PNB) fraud involving Gitanjali Group promoter and principal Mehul Choksi and his nephew Nirav Modi hit the headlines. Choksi has been untraceable since and the loans, which had not been serviced by the end of the fiscal year in March 2018, have now to be declared NPAs by all the banks in the consortium.

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