CBI busts huge fake housing loan scam

Eight top-ranking officials, including LIC Housing Finance  Chief Executive Officer Ramchandran Nair, were arrested by the CBI on charges of bribery and collusion with unnamed realty developers.

As news of the raids spread, banking and realty stocks slumped.

Reacting to the CBI action, the Union finance ministry sought to play down the racket, saying it was a bribery case involving some individuals and not a large-scale scam. The CBI’s Economic Offences Wing conducted raids on public sector banks and offices of the LIC Housing Finance in six cities to recover “incriminating” documents.

“It’s an individual case of bribery. There is no large-scale scam. The banking system is sound,” Minister of State for Finance Namo Narain Meena said. “The non-performing assets are minimal in housing loans — less than one per cent. There is no impact on asset quality of banks.”

Meena said the exposure of loans to builders is 11-12 per cent of total housing advances.

But the agency said the bank officials allegedly colluded with the firm to sanction large-scale corporate loans to realty developers, overriding mandatory conditions for such approvals along with other irregularities.

“The CBI has busted a racket wherein a private financial services company, its CMD and other associates were allegedly bribing senior officials of public sector banks and financial institutions for facilitating large scale corporate loans,” CBI spokesman R K Gaur said in a statement.

“Officers of top management and middle management of various public sector banks and financial institutions like Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions,” the spokesman said.

“They were also gathering confidential business information from financial institutions,” the agency said. Searches were conducted at various locations in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents.

Chopra’s house in Jalandhar was raided by the CBI which also carried out search operations in Chennai where the sleuths are learnt to have “picked up” two officials of LIC Housing Finance Ltd.

Executives at Money Matters allegedly acted as middlemen, bribing officials of public sector banks to get loans worth crores sanctioned for private firms, mainly real estate companies. The bank officials are also accused of selling confidential information.  The CBI has registered five separate cases in this regard and investigation is in progress, the spokesman said.

The arrests come after the CBI probe that covered these banks and institutions, including intercepting incrimination conversations between the bank officials and the middlemen, and lasted over a year.

But curiously, the CBI did not name any real estate company. When contacted, real estate companies including HDIL, DB Realty, Orbit and Indiabulls clarified that the companies were not on the CBI’s radar.

In one FIR filed by the CBI here, the agency referred to a taped conversation between Sharma of Money Matters and Tayal of Bank of India, Mumbai. The CBI charged that Sharma paid a Rs 25-lakh bribe to Tayal to get him to sanction two loans worth Rs 500 crore for two different firms. “If you can’t get a 300-crore project passed... what is the use of you being in this position?” asks Sharma, in the purported taped conversation.
In another case, Naresh Chopra of LIC Mumbai is accused of receiving Rs 16 lakh from Sharma. Chopra allegedly traded confidential information on LIC investments into companies like the Adani Group and Religare. In a statement issued after the raids, LIC Housing Finance claimed that “all procedures and due diligence consistent with board-approved guidelines have been adhered to in approving the loans, as has been followed in the past by the competent authority.”

Hall of shame

Those arrested by the CBI include Ramachandran Nair, LIC Housing Finance CEO;  Naresh K Chopra, Secretary (Investment) of LIC (Mumbai); R N Tayal, General Manager of Bank of India (Mumbai); Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India (Delhi); Venkoba Gujjal, Deputy General Manager of Punjab National Bank (Delhi) and Rajesh Sharma, CMD of Mumbai-based NBFC Money Matters, with his staff members Suresh Gattani and Sanjay Sharma.