Many of the country's leading corporations including Reliance Industries, Reliance (ADA) group, the Adani group and Essar group came under a blistering attack from senior lawyer and civil rights activist Prashant Bhusan at Mumbai today, as being examples of crony capitalism which along with political pressure contributed to many of the problems facing the economy today.

He was speaking on the topic, 'The mounting problem of NPA - who is the culprit? ' at the AIBEA's National Banking Conclave.

There were many cases of over-invoicing involving these corporations pointed out by the Directorate of Revenue Intelligence (DRI) as well as CAG audits in the past years, he said.

The modus operandi of many of these cases were very similar, he said.

The money was siphoned out through over-invoicing by intermediary companies set up outside India which would then remit the money to another fully owned company in a tax haven like Cayman Islands, for example, he said.

In the case of Reliance Industries, the CAG had pointed out in a scathing report some years ago that there was over-invoicing to the extent of over 1 billion dollars in the D-6 gas fields, he said.

Bhushan questioned the sharp rise in the prices of Rafale fighter aircraft deal which India had signed with the french manufacturer when the PM had visited France a few months ago.

He said when the UPA was in power, the price of a single aircraft was around Rs 530 crore. A month before Manohar Parikkar, former defence minister resigned, he had mentioned that the cost per aircraft worked out to Rs 700 crore, he said.

Just a little while later, the PM went to France and a contract for 36 planes was signed and the cost had risen to Rs 1,700 crore per aircraft. This, he said, was justified by the government on the grounds that a new helmet was being offered for the pilot as well as a new bay for an extra missile!

He questioned the Government's anti-corruption credentials when there was no transparency in such deals.

He called for greater transparency in the loan appraisal process when a corporation approaches public sector banks for funds.

Bhushan said they ought to lose their right to privacy when they ask for public funds and cannot later take protection under the rules when their default has to be disclosed.

He urged the setting up of an independent credit appraisal authority to do the appraisal of every loan proposal from top corporations. This would ensure that forum shopping being done by corporations (moving from one public sector bank to another in search of loans) would come to an end.

Although this may result in erosion of autonomy for banks themselves, it would also prevent the problem of individual banks coming under pressure, he said.

He also suggested that conditional personal guarantees must be taken from promoters which will kick in, if there is any attempt to siphon out money from the enterprise they are running. They cannot take protection under the limited liability concept of corporations then.

Bhushan also cautioned bankers to be wary about the pitfalls in the new Insolvency and Bankruptcy code. This was already being manipulated by some unscrupulous borrowers, he said.

In the case of Amrapali Group, a real estate group with about 20 companies, which had recently been taken through the insolvency process, many group companies were declaring bankruptcy one after another.

Bank of Baroda (the banker to the group) was trying to get it to declare insolvency through the process and the company was not resisting it all. Instead, the auditor of its companies was appointed as an Insolvency resolution professional and called this an example of collusive practice.

Privatisation of public sector banks is not the solution to the problem of NPAs, Bhushan said. Public sector banks fulfil a vital social need and a country like India with large number of poor people need access to finance.

He pointed out that the government should not abdicate its responsibility to poor people. There will be need for soft loans for farmers, for instance, something which private sector banks are never going to give, he said.