Indian shipbuilder accused of record $3 bn bank fraud

A shipbuilding company has been accused of defrauding India's largest state-run bank and 27 other financial institutions of over $3 billion, the country's top investigative agency said, in what would be its biggest-ever bank fraud.

The Central Bureau of Investigation (CBI) -- India's federal investigative agency -- said in a statement that ABG Shipyard had duped 28 banks out of 228.42 billion rupees ($3 billion).

The alleged theft by the Gujarat-based shipbuilder surpasses the $2 billion jeweller Nirav Modi was accused of cheating Indian banks out of in 2018, so far the country's largest known bank fraud.

Private lender ICICI Bank was ABG's biggest victim, losing more than $900 million, according to a forensic audit by Ernst & Young released at the weekend by the State Bank of India, another of its lenders.

State-run IDBI Bank -- owned by IPO-bound insurer LIC -- was next with nearly $500 million, the document said, followed by the State Bank of India (SBI) itself -- the country's biggest state-owned lender -- on almost $400 million.

In all, the Indian taxpayer lost $2 billion to the scheme, according to the audit report figures.

The CBI said the company diverted and misappropriated funds between 2012 and 2017 -- even as its lenders worked to resuscitate the ailing firm and save it from liquidation.

The SBI filed a police complaint against ABG Shipyard, its overseas subsidiary, five company directors and "unknown public servant(s) & private person(s)".

The CBI raided 13 locations including company offices and the directors' homes on Saturday, it said, "which led to recovery of incriminating documents", and further investigation is ongoing.

ABG Shipyard first defaulted on loan payments in 2013 and was named as one of India's 12 biggest defaulters when the country introduced its first bankruptcy law in 2016.

The firm was finally ordered liquidated three years later, but four separate auctions failed to find buyers for its assets and it has been trying to sell them privately for the last two years.