Four months ago, the then SBI chief, Mr O.P. Bhatt, had said that all necessary procedures were followed while sanctioning loans to some of the telecom operators who were embroiled in 2G spectrum scam.

Shortly after the Central Bureau of Investigation (CBI) began probing the role of public sector banks in the 2G scam, Mr Bhatt said, “I don't think that anything SBI has done in this case justifies apprehensions or doubts of any kind.”

He went on to add, “As a banker, we look at various procedures, such as tangible assets, collateral securities, etc, for not only telecom firms but in other sectors also. This we have been doing for so many years. It is not a question of how much money we give, it is a question of whether that money is at risk or not”.

An inspection by the Reserve Bank of India of SBI's loan book, however, revealed that there were a number of deviations while lending to some of these telecom companies – especially when giving them ‘bridge loans'.

(Bridge loans are short-term loans given as an interim measure (at higher rates normally) to the borrower pending a more permanent arrangement.)

For instance, SBI had sanctioned a bridge loan of Rs 2,500 crore to Uninor (Telenor Unitech Wireless Company) in July 2009 for the purpose of part financing capital expenditure pending long-term project finance tie-up.

Neither was any financial institution identified nor were there any committed financial tie-up at the time of disbursement. This was a deviation from the established procedure for giving bridge loans. Again the roll out plans of this company should have been completed by February 2009 (within a year of getting the licence), whereas even while sanctioning the bridge loan (July 2009) there was nothing in place.

A year later, a regular term loan of Rs 9,475 crore was sanctioned for the entire project including a sum of Rs 2,850 crore to replace the earlier bridge loan.

But there was still no committed tie-up in place for the balance Rs 6,625 crore and so the term loan amount was not released. But the earlier bridge loan was rolled over till December 2010.

Similarly bridge loans/bank guarantees given to companies such as Loop Telecom (Rs 725 crore), Datacom Solutions (Rs 1,100 crore), Swan Telecom Private (Etisalat DB) (Rs 395 crore) were either adjusted against a regular loan issued later or rolled over, despite there being no financial tie up or operations in place.

In another deviation, SBI sanctioned a corporate loan of Rs 2,500 crore for Reliance Communications for capital expenditure. This was given on an unsecured basis without an assessment of the credit requirement. Existing rules don't permit unsecured lending on that scale.

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