The ABG Shipyard scam is the biggest banking fraud in India, amounting to a total of ₹22,842 crore. The ABG Shipyard Ltd is one of the top private shipbuilding organizations and is under the founder, Rishi Kamlesh Agarwal. The scam unveiled itself when forensic audits were conducted, and diversions of funds, inflated expenses, and fraudulent loan applications emerged as findings. Critical concern has emerged in the wake of this scam, focusing on corporate governance, banking supervision, and loopholes in regulatory deficiencies within India’s financial system.
About ABG Shipyard
ABG Shipyard Limited was India’s first in the shipbuilding sector. ABG Shipyard Limited was highly acknowledged for its delivery of high-quality vessels to clients from all over the world. Rishi Kamlesh Agarwal started the company back in 1985. During its prime time, it was the largest private-sector shipbuilder in India.
ABG Shipyard was a company that started by repairing ships but, in no time, began constructing them too, serving not only the country but also internationally. The company had manufactured various kinds of vessels including bulk carriers, oil rigs, and special ships. It owned two world-class shipyards in Gujarat, namely at Dahej and Surat.
ABG Shipyard expanded its operations rapidly in the 2000s and secured major orders from clients all over the world. The large projects of the company were financed through massive loans from the banks. Poor financial management and aggressive borrowing led to mounting debt, which eventually became a massive fraud.
| Company Name | ABG Shipyard Limited |
| Founder | Rishi Kamlesh Agarwal |
| Established | 1985 |
| Core Business | Shipbuilding, oil rigs, and bulk carriers |
| Headquarters | Surat, Gujarat |
What Was the ABG Shipyard Scam All About?
The ABG Shipyard scam was about the diversion of funds, inflated project costs, and wrong presentation of health in financial terms. The company received loans from a consortium of banks but did not use the borrowed amount for the project.ABG Shipyard borrowed ₹22,842 crore from 28 banks, including public and private sector lenders, between 2012 and 2017. The amount was for shipbuilding projects, but the company diverted a significant portion of it to unrelated businesses and personal accounts.
Key Features of the Scam
- Loan diversion: ABG Shipyard transferred large amounts to offshore entities and shell companies, disguising the transactions as business expenses.
- Over-Inventorying: ABG Shipyard overstated the cost of its projects so that it raised more loans than it needed to.
- Manipulated Accounts: The company had manipulated its accounts to cover its deteriorating financial position and was cheating the banks.
- Not Repaying the Loans: When the company obtained huge loans, it failed to repay them and declared bankruptcy.
For instance, ICICI Bank gave ₹7,089 crore to the company; but it diverted huge amounts of this into third-party pockets and failed to use it for shipbuilding. By 2016, troubles for ABG Shipyard were mounting, and the banks started declaring loans from them as NPAs.
The CBI Action on ABG Shipyard Scam
The entire information on ABG Shipyard Scam is brought under the CBI action. This central investigation bureau started opening up their doors toward widespread scrutiny on the entire issue, after receiving all the complaints based on some irregularities, filed by concerned banks over this company.
The CBI had filed a case against Rishi Kamlesh Agarwal and other company executives in February 2022 based on a complaint filed by the State Bank of India. The agency charged them with criminal conspiracy, cheating, forgery, and breach of trust under the Indian Penal Code.
Timeline of CBI Action:
- 2019: The banks flagged suspicious transactions and reported the fraud to the CBI.
- 2020: The forensic audit conducted by Ernst & Young did obtain the confirmation of the diversion of funds and financial anomalies.
- February 2022: Officially, the CBI had filed an FIR against ABG Shipyard and had made raids at multiple locations in Mumbai, Pune, and Surat.
Incriminating documents and digital records along with other evidence, where it was revealed that the company forged the bank fraud
How Old Is ABG Shipyard?
ABG Shipyard was founded in 1985 by Rishi Kamlesh Agarwal in Surat, Gujarat. It began as a ship repair company and eventually became the largest private shipbuilding company in India.
The initial years of the company saw steady growth and development in technology for shipbuilding. The 2000s were enough for ABG Shipyard to become one of the market’s leaders as it delivered more than 165 vessels to clients both in the domestic and international markets.
However, the dependence of the company on borrowed funds, and the failure of the company to adapt to shifting market conditions triggered financial stress in the firm. Its expansion ambitions eventually became a gateway for the ABG Shipyard scam that collapsed in the last decade of the 2010s.
Bank Defrauded by ABG Shipyard
The ABG Shipyard scam defrauded a group of 28 banks and financial institutions causing huge losses of Rs 22,842 crore. These banks provided loans based on fake financial statements prepared by ABG Shipyard and incurred costs. The project is inflated. These banks contribute to large-scale fraud by not tracking the final use of funds.
List of 28 banks Defrauded by ABG Shipyard
Here is a list of all banks and financial institutions affected by this scam. Along with the disclosure:
| Bank/Institution Name | Exposure (₹ Crore) |
| ICICI Bank | 7,089 |
| IDBI Bank | 3,639 |
| State Bank of India (SBI) | 2,468 |
| Bank of Baroda | 1,614 |
| Punjab National Bank (PNB) | 1,244 |
| Indian Overseas Bank | 1,228 |
| Exim Bank | 1,327 |
| Union Bank of India | 1,000 |
| Bank of India | 719 |
| Indian Bank | 570 |
| UCO Bank | 462 |
| Andhra Bank | 430 |
| Syndicate Bank | 405 |
| Oriental Bank of Commerce | 375 |
| Axis Bank | 330 |
| Canara Bank | 285 |
| Vijaya Bank | 245 |
| Corporation Bank | 230 |
| Dena Bank | 200 |
| Allahabad Bank | 180 |
| Central Bank of India | 150 |
| United Bank of India | 140 |
| HDFC Bank | 120 |
| Yes Bank | 115 |
| Lakshmi Vilas Bank | 110 |
| Jammu and Kashmir Bank | 100 |
| Standard Chartered Bank | 85 |
| Kotak Mahindra Bank | 60 |
Impact on the Bank
The bank had serious flaws in its due diligence and verification procedures. ABG approved many of the loans without assessing the shipyard’s solvency. And did not follow up on the appropriate use of funds.
- Public Sector Banks: Public sector banks have a large number of loans. This causes them huge financial losses.
- Private Sector Banks: Private sector banks risk is quite low. However, the scandal has affected its profitability and credibility.
This fraud has exposed the systemic problems in the Indian banking system. Poorr risk assessment lack of supervision and ineffective recovery mechanisms are some of the causes.
Who are Agarwal’s Accomplices in ABG Shipyard Scam?
Rishi Kamlesh Agarwal is the key accused in the ABG Shipyard scam. He, however, was not a solo actor in this scandal. A lot of his accomplices are executives at the company, auditors, and financial advisors.
Major Accomplices
- Board Members: Top managers and directors endorsed the siphoning of funds and fraudulent financial statement submissions.
- Auditors: Accountants for finance could not detect irregularities in ABG Shipyard’s books.
- Shell Companies: Offshore entities were the conduits of diverting funds, which camouflaged the fraudulent transactions.
The CBI is still probing the roles played by these individuals and entities in the scam.
Which Was the Audit Firm and What Did it Say?
Audit is a process associated with the investigation of financial fraud. As far as the ABG Shipyard scam, an audit through Ernst & Young (EY) brought to complete light the wrongdoings performed by the Company.
The report stated that ABG Shipyard diverted ₹5,000 crore to unrelated entities. It overstated project costs for larger loans. It also used loans for personal gains and speculative investments.
The auditors pointed out the lack of internal controls in the company and condemned the financial mismanagement of the company.
Where is the Investigation Now?
The ABG Shipyard scam probe is on and the agencies working together. Recovery of money, bringing the criminals to book, and strengthening of rules to ensure such scams never happen again.
- Actions by CBI and ED: Raids are being continued along with the seizure of assets and interrogation of some of the top functionaries.
- Bank Recovery Process: Banks are recovering money by selling the seized assets and recovering insolvency.
- Litigation: Litigation against Rishi Kamlesh Agarwal and others are under way in the court.
The scam led to regulatory reforms that aimed at improving oversight and accountability in India’s banking system.
ABG Shipyard Scam FAQs
1. What is ABG Shipyard Scam?
ABG Shipyard scam is India’s largest banking scam under which ABG Shipyard Ltd fraudulently transferred loans amounting to Rs 22,842 crore.
2. Who is Rishi Kamlesh Agarwal?
Rishi Kamlesh Agarwal is the founder of ABG shipyard and the primary accused in the scam. He misused bank loans and orchestrated fraud.
3. Which bank did ABG Shipyard scam?
Some of the 28 affected banks included ICICI Bank, SBI, and IDBI Bank.
4. When did this scam take place?
The scandal was discovered in 2019 following a forensic audit which indicated diversion of funds and some other irregularities.
5. What is the role of the audit office?
Forensic investigation by Ernst & Young discovered embezzlement in the matter. Accounting fraud and a lack of internal controls at the ABG shipyard.
