Export Credit Guarantee Corporation of India faces zooms Sunk loans to Zoom Developers, a Mumbai-based engineering and construction company that bagged several overseas projects, could boil over into an extraordinary court battle between state-run institutions. Even as banks try to salvage close to Rs. 2,600 crore, lead lender Punjab National Bank has obtained the consent of other banks in the consortium to move a winding up petition against Export Credit Guarantee Corporation of India (ECGC) — the 55-year-old financial institution that has insured a substantial part of banks’ exposure to Zoom. The banking consortium may simultaneously file a performance obligation suit against ECGC, which has insured close to Rs. 1,900 crore of banks’ credit. Till now, ECGC has refused to pay the bank’s claim on the ground that there have been irregularities and allegations of fraud that the Central Bureau of Investigation is examining. “The banks will first send a legal notice. If no positive response is received, they will approach the court,”. The banks, it is understood, had discussed the subject with the ministry of finance, which in turn had taken it up with the ministry of commerce and industry. State-Run Cos Rarely Go to Court Against Each Other. The ministry of commerce, which has administrative control over ECGC, recently referred the matter to the institution. “We have no comments to offer on what you have stated. ECGC will initiate appropriate action as and when any situation arises,” said ECGC Chairman N Shankar. In an earlier communication, the institution had spelt out to PNB the reasons why the claim could not be met. But banks — as many as 26 of them in the consortium — think they have enough ground to move court. The lenders are also upset that ECGC is reluctant to refund the premium paid to the institution for covering the exposure. If indeed ECGC has to pay the amount, the outgo would almost wipe out its net worth of around Rs 2,300 crore and force the government to infuse capital to keep it afloat. Differences between stateowned entities rarely reach courts of law. But, such a possibility cannot be ruled out in a market where all institutions are under pressure to protect their books. All the more because the earlier mechanism of a

Export credit guarantee corporation of india faces zooms

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Export Credit Guarantee Corporation of India faces zooms

Sunk loans to Zoom Developers, a Mumbai-based engineering andconstruction company that bagged several overseas projects, could boil over intoan extraordinary court battle between state-run institutions. Even as banks try tosalvage close to Rs. 2,600 crore, lead lender Punjab National Bank has obtainedthe consent of other banks in the consortium to move a winding up petitionagainst Export Credit Guarantee Corporation of India (ECGC) — the 55-year-oldfinancial institution that has insured a substantial part of banks’ exposure toZoom.

The banking consortium may simultaneously file a performance obligationsuit against ECGC, which has insured close to Rs. 1,900 crore of banks’ credit. Tillnow, ECGC has refused to pay the bank’s claim on the ground that there havebeen irregularities and allegations of fraud that the Central Bureau ofInvestigation is examining.

“The banks will first send a legal notice. If no positive response is received,they will approach the court,”.The banks, it is understood, had discussed the subject with the ministry offinance, which in turn had taken it up with the ministry of commerce andindustry. State-Run Cos Rarely Go to Court Against Each Other.

The ministry of commerce, which has administrative control over ECGC,recently referred the matter to the institution. “We have no comments to offeron what you have stated. ECGC will initiate appropriate action as and when anysituation arises,” said ECGC Chairman N Shankar. In an earlier communication, theinstitution had spelt out to PNB the reasons why the claim could not be met. Butbanks — as many as 26 of them in the consortium — think they have enoughground to move court. The lenders are also upset that ECGC is reluctant to refundthe premium paid to the institution for covering the exposure. If indeed ECGC hasto pay the amount, the outgo would almost wipe out its net worth of around Rs2,300 crore and force the government to infuse capital to keep it afloat.

Differences between stateowned entities rarely reach courts of law. But,such a possibility cannot be ruled out in a market where all institutions are underpressure to protect their books. All the more because the earlier mechanism of a

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high-powered committee of senior bureaucrats sorting out a dispute betweentwo public sector organisations no longer exists.Banks, which had sensed sometime in early 2009 that they could take a hit, haveseparately filed cases in the debt recovery tribunal to recover their money. Thetribunal hearing is expected to begin in month or two.

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