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Srei founder urges RBI governor to advise banks not to act on KPMG report


Hemant Kanoria, founder of bankrupt companies Srei Infrastructure Finance and Srei Equipment Finance, has made a last ditch attempt to stop lenders from acting on the report of KPMG, the consultant which was hired by lead bankers to carry out a forensic audit of the two companies. Even though Kanoria had moved the court challenging the report, he has appealed to Reserve Bank of India (RBI) governor Shaktikanta Das to advise regulatory officials and banks “not to give effect or any precedence and/or take any action in respect of the said report…”

According to banking circles, if the court, which is expected to give its ruling soon, rejects Kanoria’s plea, the banks may label Srei firms as ‘fraud’ accounts — a possible move that could put Kanoria and the erstwhile management under the lens.

In his letter to Das, Kanoria has once again pointed out that while finalising its report “KPMG had not given any opportunity to the board or senior management to put its contentions before it.” The report, according to him, is “biased and incomplete”. KPMG too has admitted in the report that certain findings are inconclusive.

The central bank received the letter around March 25. The Srei companies (with total borrowings of over Rs 31,000 crore) are undergoing insolvency proceedings and the RBI appointed administrator has received ‘expression of interest’ from potential bidders.

“…within the IBC (Insolvency and bankruptcy Code) period beginning 4th October 2021 to 28th December 2021, they (i.e, KPMG) interacted only with bankers and submitted a report along with an email on 26th December, wherein they have mentioned that their report is not complete,” said Kanoria in his letter to the RBI governor. KPMG was appointed by UCO Bank and Axis Bank in April 2021 following a special audit directed by RBI in January 2021. RBI had appointed Chokshi and Chokshi to conduct the audit.

On October 4, 2021, the regulator appointed an administrator, soon after which the Srei companies were admitted under IBC proceedings following an application by RBI.

Once the IBC process started, the administrator, as per the practice under IBC proceedings, appointed BDO India to do an entire audit. Unlike the KMPG audit, BDO India would have to consider the responses from Kanorias on issues that crop up in the court of the audit.

The KPMG report talks about Rs 8,158 crore loans to “connected parties”, “refinancing” of loans to “evergreen” them, and disbursal of low-interest loans of long moratorium to multiple borrowers “without adequate justification,” among other things.



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