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Rediff.com  » Business » A multi-crore housing scam now! LICHF chief arrested

A multi-crore housing scam now! LICHF chief arrested

Last updated on: November 24, 2010 19:07 IST

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The Central Bureau of Investigation on Wednesday arrested the chief executive officer of LIC Housing Finance Ramachandran Nair and seven others, including three top officials of public sector banks, in connection with an alleged multi-crore housing finance racket.

Apart from Nair, those arrested are Naresh K Chopra, secretary (investment), LIC; R N Tayal, general manager of Bank of India (Delhi); Maninder Singh Johar, director (chartered accountant) of Central Bank of India; and Venkoba Gujjal, deputy general manager, Punjab National Bank (Delhi).

Rajesh Sharma, chairman and managing director of Mumbai-based firm Money Matters Ltd and two of its employees -- Suresh Gattani and Sanjay Sharma-- were also among those arrested, CBI said. Money Matters was allegedly acting as a middleman for loans.

The CBI has asked for a 15-day remand for those arrested in the case.

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

The Union finance ministry, meanwhile, 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.

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Image: (Inset) R R Nair, CEO, LIC Housing Finance.
Photographs: Uttam Ghosh/Rediff.com
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"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.

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.

"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 viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance Ltd 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," he said.

"They were also gathering confidential business information from financial institutions," Gaur said.

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

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Photographs: Reuters
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The CBI has registered five separate cases in this regard and investigation is in progress, the spokesman said.

The Bombay Stock Exchange benchmark Sensex on Wednesday slipped 232 points in a highly volatile trade, with banking and realty stocks taking a big hit on reports of the housing scam.

Marketmen attributed the sharp decline in the stock market to the CBI raids at LIC Housing Finance and Central Bank of India offices.

The Sensex finally settled the day at 19,459.85, down 231.99 points or 1.18 per cent.

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Photographs: Uttam Ghosh/Rediff.com
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"Volatility was mainly on concerns of the futures & options clearance on Thursday, besides the market has to digest many factors be it the Ireland issue or China rate hike or the geo-political crisis in Asia," SMC Capitals equity head Jagannadham Thunuguntla said.

He further added that the mood in the overall market was already nervous and the CBI's raid at some of the financial companies further dampened the sentiments.

Country's top lenders, ICICI Bank, SBI and HDFC Bank were the biggest laggard and emerged as the biggest letdown for the bellwether Sensex.

Edgy investors abandoned the financial stocks after news started pouring in that the CBI has questioned several banks, including LIC Housing Finance, Central Bank of India regarding fake housing loans.

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Image: The BSE building in Mumbai.
Photographs: Reuters
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The SBI lost 3.34 per cent and finished last among the blue-chip firms, while ICICI Bank shed 2.73 per cent and HDFC Bank went down by 2.67 per cent.

Led by losses in these stocks, the BSE banking index ended at 13,477.92, reflecting a staggering loss of 408.56 points and was the top loser among the 13 sectoral indices.

LIC Housing Finance tanked 18.32 per cent.

"Investors are taking a cautious approach as the market is flooded with negative cues. The CBI questioning some of the top financial firms in connection with fake housing loan scam added to the woes of the market," Geojit BNP Paribas Financial Services Research Head Alex Mathews said.

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Realty major DLF also suffered losses and tumbled 3 per cent amid reports of the housing loan scandal.

On Tuesday, the Sensex had fallen by 265 points on global concerns.

Investors, who were already shaky because of negative global cues like the Irish debt crisis, China's interest rate hike and the geo-political crisis in Asia, preferred taking profit a day before this month's the Futures & Options (F&O) expiry.

Similarly, the National Stock Exchange broad-based index Nifty too went down by 69 points or 1.16 per cent to close at 5,865.75.


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