ABG Shipyard Bank Fraud (2022): Inside India’s Biggest Ever Loan Scam

The ABG Shipyard Bank Fraud (2022) emerged as one of the most staggering financial scandals in India’s corporate and banking history. Far beyond routine loan defaults or bad debts, this scandal involved allegations that a major shipbuilding company had duped a consortium of 28 banks of over ₹22,842 crore (about $3 billion) by diverting loans meant for business purposes into other entities and unrelated investments.

Unlike many scams that hit headlines for a few days, the ABG Shipyard case revealed deep weaknesses in bank lending practices, regulatory oversight, and corporate governance. The repercussions continue to ripple through India’s financial system.

What Is the ABG Shipyard Bank Fraud (2022)?

The ABG Shipyard Bank Fraud (2022) refers to a massive loan fraud case in which ABG Shipyard Ltd., a Gujarat-based ship-building firm, and its directors were accused by the Central Bureau of Investigation (CBI) of misleading banks and misusing borrowed funds. In February 2022, the CBI registered a first information report (FIR) alleging that the company and its promoters had conspired to siphon off funds, leading to a loss of over ₹22,842 crore to a consortium of banks.

This scam is estimated to be larger than many other major frauds, including the high-profile PNB fraud involving Nirav Modi and Mehul Choksi.

How the ABG Shipyard Bank Fraud Took Shape

Bank Loans and Misuse

Between 2012 and 2017, ABG Shipyard secured large loans from banks under the pretext of expanding operations and meeting capital needs. However, forensic audits later revealed that the funds were diverted for purposes other than those for which they were approved.

According to the CBI and bank complaints:

• The loans were sanctioned by a consortium of 28 banks, including ICICI Bank, State Bank of India (SBI), IDBI Bank, Bank of Baroda, Punjab National Bank (PNB), and Indian Overseas Bank (IOB).
• ICICI Bank alone had exposure of over ₹7,089 crore, SBI had around ₹2,925 crore, and IDBI Bank had approximately ₹3,639 crore.
• The loans were obtained through complex corporate structures and multiple related entities in India and abroad.

Investigators alleged that funds were transferred to subsidiaries or sister companies that did not carry out the intended shipbuilding or business activities. Instead, these funds were used for unrelated investments, asset purchases, or diverted to entities not connected to ABG Shipyard’s core business.

Also Read: – Saradha Chit Fund Scam (2013): How a Ponzi Scheme Destroyed Lives and Exposed Systemic Failure – lostnews

Who Were Involved IN ABG Shipyard Bank?

The central figures named in the FIR and CBI complaint include:

• Rishi Kamlesh Agarwal — Former Chairman & Managing Director of ABG Shipyard Ltd.
• Santhanam Muthuswamy — Former Executive Director.
• Ashwini Kumar — Director.
• Sushil Kumar Agarwal — Director.
• Ravi Vimal Nevetia — Director.
• ABG International Pvt. Ltd. — A related entity named in the case.

These individuals were charged with offences including criminal conspiracy, cheating, criminal breach of trust, and abuse of official position under various sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act.

Timeline: How It Unfolded

The ABG Shipyard fraud didn’t happen overnight — and it wasn’t investigated immediately. Here is how the events progressed:

• Pre-2012 – ABG Shipyard built a reputation as a leading shipbuilder with yards in Dahej and Surat in Gujarat.
• 2012–2017 – The company obtained large loans from banks but allegedly diverted funds.
• 30 November 2013 – The account was reportedly classified as a non-performing asset (NPA) by SBI, though banks did not publicly move against the fraud at the time.
• January 2019 – SBI flagged irregularities and commissioned a forensic audit by Ernst & Young LLP.
• November 2019 & August 2020 – SBI filed complaints with law enforcement.
• 7 February 2022 – CBI finally registered the formal FIR in Delhi, naming ABG Shipyard and its directors.

This lag between the alleged fraud period and formal action spotlights gaps in early detection and regulatory oversight.

Investigations by CBI and Enforcement Directorate

Following the FIR, the Enforcement Directorate (ED) began a parallel money laundering probe under the Prevention of Money Laundering Act (PMLA).

The ED’s investigation revealed:

• Loan funds were diverted through domestic and overseas entities.
• Assets, including shipyards at Surat and Dahej, agricultural lands, commercial and residential properties, and bank accounts worth over ₹2,747.69 crore, were identified and attached by the ED.
• Investigators traced movable and immovable assets belonging to ABG Shipyard and associated companies.

ED action seeks to recover part of the illegally diverted funds and bring the responsible parties to justice.

Impact on Indian Banks and Financial System

The scale of the ABG Shipyard fraud has had wide ramifications:

1. Losses to Lenders

Banks collectively stand to lose tens of thousands of crores, with some of the largest exposures held by major public and private banks.

2. Reputation and Investor Confidence

The scandal, unfolding suddenly after years of lending, has sparked debate about:

• Loan approval processes
• Due diligence standards
• Oversight of corporate borrowers

3. Heightened Regulatory Scrutiny

In response, Indian regulators have doubled down on:

• Forensic audits
• Timely classification of NPAs
• Transparency in loan utilization

Why the ABG Shipyard Bank Fraud (2022) Matters

This case is important for several reasons:

• It represents the largest bank fraud registered by the CBI in India’s history.
• The alleged misuse occurred over several years and involved the diversion of funds, misappropriation, and breach of trust.
• It highlights how gaps in early detection can allow fraud to continue undetected for long periods, costing financial institutions and taxpayers dearly.

Even as investigations continue, the case serves as a stern warning to corporations and banks alike: strong governance, transparent reporting, and independent audits are not just best practices — they are essential safeguards for the financial system.

Also Read: –Top 11 Biggest Scams That Shocked India: A Look at How Billions Were Lost

Conclusion

The ABG Shipyard Bank Fraud (2022) stands as a stark example of how large corporations can exploit weaknesses in the financial system to amass loans far beyond their repayment capacity — and then allegedly divert those funds for unrelated purposes.

Although legal proceedings are ongoing and recovery efforts are underway, this scandal has already reshaped the conversation around bank lending, corporate governance, and financial regulation in India. The road to accountability may be long, but the lessons learned from this case will influence how banks and regulators operate for years to come.