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Paranjoy Guha Thakurta is an educator and commentator.

What’s good for India...

Published Jun 16, 2015, 10:33 am IST
Updated Mar 28, 2019, 8:55 pm IST
If extended, the loan would be the biggest loan advanced by an Indian bank
Reserve Bank of India (Photo: DC archives)
 Reserve Bank of India (Photo: DC archives)

Seven months after India’s largest bank signed a memorandum of understanding (MoU) with a corporate conglomerate, a big question mark hangs over whether the State Bank of India will advance a first-of-its kind loan of $1 billion or over Rs 6,200 crore to a group headed by Gautam Adani to part-finance what is supposed to become Australia’s biggest coal mining project (and one of the world’s biggest as well).

A section within the 14-member central board of directors of the State Bank of India is opposing the sanction of this loan on the ground that the project — which includes building a railway line and redeveloping a port — could damage the fragile ecology of the Great Barrier Reef, one of the great wonders of the world and the planet’s single-biggest natural structure made by living organisms.


Those in the SBI board who are not in favour of the bank extending a loan for the controversial project have referred to a circular issued seven-and-a-half years ago by the Reserve Bank of India. The circular alerted banks about the “non-financial” implications of loans for projects that could have a deleterious impact on the environment.

At least one member of the SBI board has contended that if the country’s apex bank has argued that all banks in India should pay heed to ecological considerations before extending loans to projects in India, the same concerns should prevail if an Indian bank sanctions a loan for an overseas project, especially if the project is being implemented by an Indian business group.

If extended, the loan would be the biggest loan advanced by an Indian bank for a project being set up by an Indian group outside the country.
In the middle of November 2014, the heads of government of the Group of 20 (G-20) countries met at Brisbane, the capital of Queensland.
Mr Modi’s business delegation included Mr Adani and SBI chairperson Arundhati Bhattacharya. On their return journey, the MoU between the SBI and the Adani group was signed.

The big question is whether the MoU will be followed up by the bank first sanctioning, and then disbursing, the loan. On March 13, Ms Bhattacharya had dubbed media speculation about the possibility of scrapping the MoU between the bank and the Adani group as “all gossip”. Nevertheless, what cannot be denied is the fact that seven months have gone by since the MoU was signed.

This writer emailed a questionnaire to Ms Bhattacharya more than a month ago and her office acknowledged receipt of the communication. I asked her if it was correct that there is opposition to extending the loan by a section within the SBI’s board of directors. Further, I wrote that I understood that those opposed to the bank extending the loan were citing a circular issued by the department of banking operations and development of the RBI (Circular number DBOD, No. Dir. BC. 58/13.27.00/2007-08) dated December 20, 2007. No response has come so far from the bank to my email.

The circular, sent to all scheduled commercial banks in India, was signed by the RBI’s then chief general manager P. Vijay Bhaskar.
It pointed out that “there is an increasing awareness about corporate social responsibility, sustainable development and non-financial reporting” and that all banks should ensure that there is “integration of social and environmental concerns by companies in their business operations...” Further, banks should be concerned about “the process of maintenance of the quality of environmental and social systems in the pursuit of economic development”.

The RBI circular added: “The contribution of financial institutions including banks to sustainable development is paramount, considering the crucial role they play in financing the economic and developmental activities of the world. In this context, the urgency for banks to act as responsible corporate citizens in society, especially in a developing country like ours, need be hardly overemphasised. Their activities should reflect their concern for human rights and environment.”

What is good for India should be good for the rest of the world. At least, that is the logic of those in the SBI who are opposing the bank sanctioning a loan for the Adani group. In recent months, hundreds of articles have appeared in the Australian media (including in the Sydney Morning Herald and Fairfax Media) pointing out how the Carmichael coal mining project in the Galilee Basin in Queensland and the redevelopment of the Abbot Point port near the Great Barrier Reef were being staunchly opposed by civil society organisations and groups representing local inhabitants, including the Wangan and Jagalingou aboriginal tribes who are the indigenous traditional owners of the lands where the project is to come up.

In addition, the media in Australia has found “a complex web of companies” tied to Adani group’s project that extend from Singapore to the Cayman Islands. Fairfax Media has pointed out that company documents suggest uncertainty about the “ultimate ownership” of the group executing the project, which has attracted “global scrutiny” and “fierce criticism”.

According to the Green Institute of Australia, the lifetime carbon dioxide emissions of the coal mined in the Galilee Basin would conservatively be 24.7 billion tonnes, which is about five per cent of the carbon budget available for the whole world between 2010 and 2050, if the people of the planet are to restrict global temperature increases to within 2 degrees Celsius.

The recent change in government in Queensland may have an impact on the execution of the project. If the SBI does not extend a loan for the Adani group project, it will not be alone. In the past, a large number of global banks and financial institutions have denied loan requests for the project.

These organisations include BNP Paribas SA, Credit Agricole SA, Societe Generale SA, Barclays Plc., Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group, Inc., HSBC Holding Plc., J P Morgan Chase & Co., Morgan Stanley and Royal Bank of Scotland Plc. For obvious reasons, there is considerable pressure on the SBI to sanction the loan. Time alone will tell whether those within India’s largest bank will be able to resist these pressures.

The writer is an educator and commentator