EXCLUSIVE India probes loan trust units of SBI, Axis, IDBI over suspected fee cartel | Rare Techy

NEW DELHI, April 6 (Reuters) – India’s antitrust agency is investigating trust units of State Bank of India ( SBI.NS ), Axis Bank ( AXBK.NS ) and IDBI Bank ( IDBI.NS ) for suspected collusion in on expenses, it begins. a lawsuit by a group representing them, documents seen by Reuters show.

Indian regulations mandate that debt collection companies appoint a so-called “debtor trustee” to protect investors’ interests. Guarantors receive a fee from the companies that issue the loans and conduct independent ongoing audits of them.

The three people under investigation – SBICAP Trustee Company, Axis Trustee and IDBI Trusteeship – are among the business leaders in India who oversee hundreds of billions of dollars by providing trust services not only for debt securities, but also for real estate. and other investment funds.

The Competition Commission of India (CCI) said in a confidential order in December that the Trustees’ Association of India – a body with three founding members – last year “significantly” increased fees to help companies raise debt and prevented members from joining. under the floor price, thereby harming competition.

The association has launched a court case in Mumbai seeking to quash the antitrust probe directive, which it has termed “illegal” and “preposterous”, according to court filings. The case will be heard on Thursday.

The anti-trust probe and upcoming court hearing, details of which have not been announced, could have an impact on India’s nearly $500 billion corporate debt market by changing costs and affecting the way trustees operate.

A finding of cartelization can lead to a fine of up to three times the profit in each year that the fee is determined by the trustees, or 10% of the annual income for the period of the violation, whichever is greater.

SBICAP Trust and IDBI Trust did not respond to requests for comment. The trustee of Axis, who is written in the documents as the President of the Trustees’ Association, has not responded.

The CCI, which does not publicly disclose its ongoing cartel investigations, did not respond to an email seeking comment.

COMPLAINT WITH DEBTOR

The counter-suit was initiated by a complaint from Indian gold finance company Muthoot Finance ( MUTT.NS ). When it wanted to increase the loan in August last year, Muthoot received a cost proposal that was 300% higher than the previous rates.

Documents showed that when Muthoot protested, IDBI said in an August email that “the new rate structure is decided by the Trustee Association”, adding that “any change on our part in the rate statement will result in a negative reaction on us”.

“Such collective decisions by the association … affect competition in the markets,” the CCI, while ordering its probe, observed.

In February it asked the trust association to hand over minutes of its meetings and explain its role in fixing the minimum fee structure, one document showed.

The trust association has defended itself in court cases, saying the higher fee was justified because their cost burden had increased over the years due to increased trust regulatory requirements.

It said it had informed market regulator SEBI last year that the pricing structure will be decided by the trustees, but it “will not be below the benchmark price”.

The panel said the matter, by law, can only be investigated by a “specialist sector regulator”, in this case SEBI.

SEBI, already provides “adequate checks and balances to deal with any price gouging (cartelization),” it argued.

Before approaching the anti-trust body, Muthoot also filed a complaint against the trustees with SEBI, which is still being investigated, the documents said.

SEBI and Muthoot did not respond to questions from Reuters.

Reporting by Aditya Kalra in New Delhi and Abhirup Roy in Mumbai; Editing by Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.