PSBs watching Cairn’s moves after Air India notice

Top Indian public sector banks with substantial operations abroad are on high alert after Cairn Energy moved to attach assets of national carrier Air India over the weekend to enforce a $1.2 billion arbitration award against the Indian government.Lenders including State Bank of India, Punjab National Bank and Bank of Baroda, which have branches and subsidiaries across the world, are monitoring filings against them in courts abroad and have kept attorneys ready to defend their assets against any claims by Cairn.“So far we have not heard of any actions against the bank but we are well aware of Cairn’s move against Air India. Our teams are ready. In countries like the US and India, lawyers can track any fillings against their clients and that is also being done. We are on alert,” said a senior public sector bank executive.Cairn Energy and its subsidiary Cairn UK Holdings had initiated international arbitration proceedings at the Permanent Court of Arbitration at The Hague, Netherlands, under the India UK Bilateral Investment Promotion and Protection Agreement, alleging that the retrospective amendment in the Finance Act of 2012 and tax proceedings constituted a breach of obligations by India.The Scottish oil and gas explorer had made a big oil discovery in Rajasthan in 2004. It listed its Indian arm in the local exchanges in 2006. However, with the retrospective law passed in 2012, the government demanded ₹10,247 crore from Cairn in tax, interest and penalties linked to the listing. The government seized dividends and held back tax refunds to recover its claims.However, Cairn won the arbitration at The Hague and proceeded to enforce its claims.The senior bank executive said acting against the national carrier was easier because unlike a bank, an airline has tangible assets in the form of aircraft that can be impounded and sold for some value.“Banks have assets but they are mostly in the form of loans. The deposits we hold are of individuals or institutions which cannot be touched. In the case of state-owned airlines, there have been precedents. Planes of Pakistan International Airlines were impounded in Malaysia in January. Previously, Venezuelan assets have been impounded in the US and there also has been action against Argentine cash kept in some banks abroad. But unlike all these cases, India does not keep cash abroad because it can afford to pay through letters of credit as and when the payment demands come,” the bank executive said.82690736The government has asked Indian public sector banks to be ready to defend their assets abroad. The department of financial services, a finance ministry arm, told state-run banks to appoint a nodal officer amid increasing concern over the likelihood of overseas assets or deposits of public sector banks being attached during the contested arbitration award, ET reported on May 12.The department wrote to public sector bank chiefs suggesting they immediately inform Sanjay Kumar, director – banking operations, if they receive any intimation/notice/letter from Cairn Energy and its subsidiary.

from Economic Times https://ift.tt/3hxfcUK