Environment Support Group ®
Regd. Post/Ack Due
Ms. Usha Turat
Chief General Manager
Industrial Export and Credit Department
Reserve Bank of India
Central Office, 12th Floor
Central Office Building
Mumbai 400 001
14 March 2003
Ref.: Letter dated DBS (MRO) No 1727/17.21.25/2002-03 dated 25 October 2002 and RBI Case No. 105/16.8.2002; Our letter to you dated 28 November 2002
Reg: Violations of RBI Circular No. IECD No. /08.12.01/2001-02 dated 20 February 2002 by financiers of the Bangalore-Mysore Infrastructure Corridor Project (BMICP)
Dear Ms. Turat,
In our letter to you dated 29 November 2002 we had urged you to take necessary action per our RBI Case No. 105/16.8.2002. As we had no response to this, we called you on 15 January 2003, when you informed that Ms. Rosemary is investigating the case. We have heard no further on this matter since.
It is reported in today’s newspapers that financial closure has been achieved on 12 March 2003 by M/s Nandi Infrastructure Corridor Enterprise for the Bangalore Mysore Infrastructure Corridor Project (BMIC). The report is based on a statement made by Mr. R. V. Deshpande, Karnataka Minister for Large and Medium Industries, in the Karnataka Assembly, in response to a question. We are enclosing a copy of this report, as reported in Deccan Herald dated 14 March 2003, for your perusal and records.
We fear that the financial closure is in violation of RBI Circular No. IECD No. /08.12.01/2001-02 dated 20 February 2002, which is the basis of our complaint. Considering that RBI is investigating the case against ICICI for potential violation of the Circular, it would have been appropriate that the financial closure should have been kept in abeyance, pending closure of RBI investigations. This is not the case as is presently reported.
We bring this matter to your attention and urge you to consider investigation of our complaint on a priority basis, especially legal and financial implications of the financial closure, and take action per law for violation of the said circular. In this regard we wish to highlight ongoing efforts of RBI warning lending agencies against supporting projects on the basis of State Government Guarantees. A copy of such a report from Deccan Herald dated 25 February 2002 is enclosed, where it is reported that RBI “has asked the commercial banks and financial institutions to refrain from granting project financing based on State Government guarantees. The lending should be based on commercial viability and bankability”.
ICICI financing the BMIC project is a case wherein State guarantees form the basis, and thus, in our opinion, violate the RBI circular. We hope you will consider this request in 15 days, for otherwise we may be constrained to take such action as we deem fit in seeking relief on this public interest cause.
Leo F. Saldanha Rajmohan Pillai
Coordinator – ESG ESG – Infrastructure Finance Research
Encl.: As above