MUMBAI: Lenders are using the services of investigation firms to identify personal assets of defaulters. Banks use services of experts to ferret out assets hidden behind a corporate veil.
Although banks have been careful to take personal guarantees from promoters at the time of loan restructuring, they have not had much success in executing those guarantees. One reason for the failure has been that much of the assets used by the promoters are owned by investment companies. Also, a corporate structure allows the promoters to stash funds overseas.
Speaking to TOI, Reshmi Khurana, India office head of Kroll, a corporate investigations and risk consulting firm, said that given the rise in bad loans and the pressure from RBI on lenders to clean up their balance sheet, banks are looking for expert assistance. “As part of enforcing personal guarantee, banks have to find the personal assets. Often at the time of granting a loan, banks ask for personal guarantee but they don’t really have a full picture of the promoter’s asset base. We have been working extensively with banks as they try to chase assets of promoters. These assets may be hidden abroad or hidden behind companies,” she said.
According to Khurana, the asset search does not just involve properties currently owned by the defaulter. “When we look for assets, we do not look for those that are currently owned but we look for assets that were owned up to three years ago and make sure that there was no fire sale of assets,” said Khurana. “With globalisation of business and offshoring of finance, it is easy from Indian promoters to hide the true ownership of assets. All they have to do is open an account in Cyprus or Lichtenstein or Hong Kong,” said Khurana.
While it is not illegal for someone to have an offshore bank account or an apartment in London, the question is how was that financed? “If the search was only to enforce the personal guarantee, the bank won’t care how the asset was bought. The bank will ask the borrower to repay. But no two cases are the same and the cases depend on what the purpose of the search was,” said Khurana.
Khurana says that there are several success stories although they do not make it to public domain. “When a bank does an asset search, companies know that the bank is serious. That itself leads promoters to come forward.” She adds that globally asset search is very ogranised, and in London or New York, ownership of apartments is public record information. “Of course, a bank account in Cyprus or British Virgin Islands or Panama they are much more secret. But even then, there are some jurisdictions where if there is a court order or indication that the banker has suffered a fraud, the bank will share information,” she said.
Credits ET Realty