Banks In Denial Over Satyam Exposure
Currently the Indian banking sector seems to be in denial mode about potential exposure to Satyam Computer Services, with most lenders rushing to deny any exposure or to state that whatever exposure they do have is not material.
An executive with the state owned Bank of Baroda which has an exposure to Satyam said clients who engage in fraud and are subsequently discovered are not considered normal customers and banks may therefore withdraw credit lines.
ICICI Bank said it has an exposure of Rs 3 crore or US$ 625,000 and issued a statement saying “ICICI Bank has no fund-based or non-fund based exposure to Satyam Computer Services (Satyam) other than a marginal exposure of about Rs 3 crore on account of a forward contract. Satyam has a deposit with ICICI Bank in a current account. The balance in this account is not material”
According to the company’s balance sheet which it must be said is no longer reliable, Satyam’s total outstanding secured debt in September was just Rs 253 crore or US$ 53 million whilst unsecured debt stood at Rs 235 crore or US$ 49 million, implying a total outstanding bank debt of Rs 488 crore or US$ 102 million.
Currently no bank has claimed any material exposure to Satyam, other than SBI saying that it had extended a personal loan of Rs 200 crore or US$ 41 million which it believe will end up as non performing.
HDFC Bank said it has “marginal exposure” through the extension of auto loans which have not defaulted whilst foreign banks have been conspicuously silent with the likes of HSBC and Citibank declining to comment.
Much of the debt probably lies with various state owned banks like Bank of Baroda which has said its exposure cannot yet be ascertained, though as yet none of them have admitted publicly to having a liability. A research report issued my DSP Merrill Lynch claimed that most of debt could lie with multinational banks since many of the fictitious balances created by Mr. Raju were also supposedly with these banks.
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