Saturday, October 9, 2010

Banks ask Oriental to pay Rs 400 cr on Paramount default


                                  INDIAN AVIATION NEWS

Mumbai: The state-owned Oriental Insurance has been saddled with claims of Rs 400 crore from five banks, namely, State Bank of India, Bank of India, Indian Bank, Andhra Bank and IDBI Bank. The banks are looking to recover the money paid to the oil companies on behalf of Paramount Airways.
The defunct Chennai-based airline had defaulted on bank guarantees issued by these five banks.
Disturbed by the development, Insurance Regulatory & Development Authority (Irda) has banned the sale of credit insurance by general insurance companies, except state-owned Export Credit Guarantee Corporation (ECGC). Without mentioning the Paramount case, an Irda order last week said it believed that insurers were underwriting risks which were not governed by a proper regulatory framework or sanction.
At over Rs 200 crore, Bank of India has the largest exposure to Paramount’s bank guarantee, while SBI has guaranteed around Rs 80 crore and the others Rs 20 crore each. Promoted by entrepreneur M Thiagarajan, the airline had taken credit insurance cover from Oriental in 2008-09 for its multiple bank guarantees to cover its transactions with state-owned oil companies.

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