IL&FS Financial Services ex-CEO had direct role in diverting Rs 17,500 cr

Mumbai: The former CEO of IL&FS Financial Services (IFIN) Ramesh Bawa had a direct role in diverting as much as Rs 17,500 crore from the company to the bank accounts of certain borrowers and group companies in order to make them look healthy, the Serious Fraud Investigation Office (SFIO) told a Mumbai court. The investigating agency also said that a part of the money was transferred to Bawa's personal account. The SFIO is probing the financial irregularities in the IL&FS Group of companies.

Bawa was arrested by the investigating arm of the Ministry of Corporate Affairs from Delhi on Friday night. He was produced before a holiday court on Sunday which extended his custody till April 18.

'Bawa helped companies get big loans'

The board, which took charge of IL&FS after the financial crisis was exposed, said that around 90 percent of IFIN's gross loans had gone bad by the end of December 2018. "Many loans extended by IFIN were to companies with which Bawa had some close relationships. He was not only instrumental in helping them bag loans but he used IFIN to routinely top up loans of borrowers to help them repay pending dues and ensure they did not become non-performing assets," an official aware of the investigation said.

The source added that this was done to keep the company's financial statements afloat and to ensure that they continue to get good credit ratings.

IFIN sought to avoid recognition of loans as NPAs

The official said that the intent of the management was "postponement or avoidance" of these loans as non-performing assets (NPAs). In doing so, they also failed to fulfil the directive issued by the Reserve Bank of India (RBI) on the declaration of NPAs.

The counsel who sought Bawa's custody and represented the SFIO, Hiten Venegaonkar, said that Bawa was at the helm of affairs at IFIN and had a direct role in diverting Rs 17,500 crores. "This is a huge amount considering the current state of the Indian economy," he added.

Bawa got higher remuneration because of over-statement of profits

The SFIO also said that like Hari Sankaran, the former vice chairman of IL&FS who was arrested earlier this month, Bawa too got performance-linked pays, salaries and perks. The remand application said that overstatement of profits enabled payment of higher remuneration to the management and dividend to IL&FS.

It was also found that in certain cases the borrowers favoured by the company offered incentives to them in the form of foreign trips for the former board members and their families.