The CBI on Wednesday addressed a press conference regarding arrests of eight officials of public sector banks and financial companies. Speaking to the press, CBI’s EOW chief P Kandaswamy said the agency has busted a housing loan scandal racket and arrested CEO of LIC Housing, General Managers of Bank of India and Central Bank of India (New Delhi) and CGM of Punjab National Bank. Several other bank officials have also been arrested on bribery charges. The CBI said classified business information was also given out for favours.

The CBI also said officials of Money Matters have been arrested for broking bribery deals. The LIC secretary (investments Mumbai) too has also been arrested on bribery charges.

Reports suggest that the CBI has arrested the following:-

  1. Ramchandranan Nair (CEO, LIC Housing Finance Ltd, Mumbai),
  2. Naresh K Chopra (Secretary, Investment, LIC Mumbai),
  3. R N Tayal (General Manager, Bank of India, Mumbai),
  4. Mahinder Singh Johar (Director, Central Bank of India, New Delhi),
  5. Venkoba Gujjal (DGM, Punjab National Bank, New Delhi), and
  6. Rajesh Sharma, Suresh Gattani and Sanjay Sharma of M/S Money Matters.

Shortly before the stock markets shut trade for the day, talks of LIC Housing Finance being involved in a multi-crore scam surfaced sending realty and banking stocks spiralling down. The CBI, which was said to be questioning a slew of people involved in the scam, included officials from LIC Housing, Central Bank of India and a real estate developer, whose identity was not disclosed.

Meanwhile, CBI has clarified that though realty companies are named in the FIR but it is ‘not as accused.’ All the eight arrested will be in CBI custody for five days. CBI has said that 5 FIRs have been registered under prevention of Corruption Act.

The bank officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

These arrests, according to senior banker and HDFC chairman Deepak Parekh, reveals bribery and corruption by public officials in sanctioning home loans.

“These are cases of bribery. These are cases of corruption. Bribery by public officials, by people working in public sector organisations and facilitating and sanctioning loans by taking money”, Parekh said.

“They (CBI) have zeroed in real estate sector and certain developers who must have paid money to get loans sanctioned”, he said.

The CBI earlier said that it had 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.”

Searches were conducted at various locations in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents, the investigating agency said.

The agency said it registered five separate cases and that investigations were in progress.

The Finance Ministry said it would explore the possibility of instituting a departmental inquiry into the housing finance racket that led to arrest of senior officials of the LIC Housing Finance and public sector banks.

“If there is provision (of departmental inquiry), we will set up inquiry. Otherwise banks at individual levels will set up inquiries” a senior official said here.

The official was responding to a query on the possibility of the Finance Ministry instituting an inquiry to look into the housing finance racket.

Describing the episode of arrests of bankers as incident of “bribery”, the official said, it will not have any impact on the asset quality of the banks.

“We have inquired from individual banks about the asset quality and banks have said there will not be any increase in NPAs (Non-Performing Assets) due to this episode”, the official said.

Searches were conducted at various locations in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents, the investigating agency said.

The agency said it registered five separate cases and that investigations were in progress.

So should the consumers be worried?

“No,” says Deepak Parekh, “there’s no impact on retail loans.”

News of the raids took housing finance stocks down, with LIC housing stocks plunging by 20%.

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