Oriental Bank and Simbhaoli at new low

Not surprisingly, Oriental Bank of Commerce is the top loser on the BSE currently, hitting a new 52-week low at Rs.92.50. Along with it, Simbhaoli Sugar is also down in the deep red, going down to a new low at Rs.13.50.

One more banking pickle gone bad – the CBI yesterday registered a case against Simbhaoli Sugars and its top executives for causing a loss of Rs.09 crore to Oriental Bank.  In the FIR lodged by the bank, it has named all the top management, including Chairman and Managing Director for allegedly defrauding the bank.

The bank stated that it has sanctioned a Rs.149 crore loan in 2011 to Simbhaoli for financing individual, joint liability groups, self help groups (SLG) and sugarcane farmers under the tie-up arrangement under the RBI (Reserve Bank of India) Scheme to 5762 sugarcane farmers supplying sugar produce to the company. The Bank states that this was dishonestly and fraudulently diverted by the company for its own needs. The account was later declared as alleged fraud by the bank to RBI on 13 May 2015 for an amount of Rs97.85 crore.

Notwithstanding this, the Bank went on to sanction a corporate loan of Rs.110 crore in 2015 to pay its outstanding loan of Rs97.85 crore. This loan too turned NPA in Nov’16.

With so many ugly worms coming out of the PSU banking can gone rotten, the markets most certainly do not want to take any chances at the whiff of trouble.