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    • Reserve Bank to investigate ICICI
    The RBI's Banking Supervision department has opened a case against ICICI Bank over the financing of the Bangalore Mysore expressway project.
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    September 2002: The Department of Banking Supervision of the Reserve Bank of India (RBI) has filed a case against the ICICI Bank. The complaint was brought by a Bangalore based environmental NGO over financing of the controversial Bangalore Mysore Infrastructure Corridor Project (BMICP). BMICP involves the development of an expressway, several townships and other facilities in the corridor between Bangalore and Mysore.

    In its complaint dated 24 July 2002, the Environment Support Group (ESG) brought to the attention of the RBI that the financing of BMICP based on State Guarantees would be in absolute violation of a circular issued by the RBI in February 2002. The RBI had instructed all banks and financial institutions on “Financing of Infrastructure Projects”. The circular stated amongst other requirements that "State Government guarantees may not be taken as a substitute for satisfactory credit appraisal and such appraisal requirements should not be diluted on the basis of any reported arrangement with the Reserve Bank of India or any bank for regular standing instructions/periodic payment instructions for servicing the loans/bonds.”

    Correspondence with various financial institutions including the RBI's response to ESG are available here
    ESG pointed out in the complaint that Mr. Ashok Kheny, MD Nandi Infrastructure Corridor Enterprise (project developer) has repeatedly claimed that the highly controversial BMICP's financial closure is based on a “comfort letter” issued by the Government of Karnataka. Neither the State Government agencies or the financial institutions concerned have not contested this claim. In particular, has raised this issue with the financial institutions in June 2002, but has had no response from them.

    RBI's case against ICICI Bank, based on ESG's complaint, must be viewed in the context that its February Circular is a clear direction to financial institutions to put an end to a series of Bank financed scams in infrastructure development. The Enron-Maharashtra saga is a classic case of such economic misadventures. ESG's Leo Saldanha states categorically that "it would not be an exaggeration to address BMICP as the 'Enron' of Road Development."

    In the absence of the disclosures to the contrary as well as press statements from the GoK, it is widely believed that the state government continues to back this project. Readers can find India Together's coverage of the campaign on questioning clearances given to BMICP on the BMIC home page.

    India Together
    September 2002