2. Housing scam: CBI arrests top officials
of PSU banks, financial institutions
• The Central Bureau of Investigation (CBI) has arrested
eight finance executives, including the chief of LIC
Housing Finance, accusing them of taking bribes to give
big corporate loans and sending shockwaves through
stock and property markets at a time when the
government is buffeted by a series of high-profile
scandals.
• LIC Housing Finance chief executive Ramachandran
Nair, Life Insurance Corporation secretary for
investments Naresh K Chopta, Bank of India general
manager RN Tayal, and Central Bank of India director
Maninder Singh Johar were among those arrested in the
nationwide swoop by investigators.
3. Contd…
• The agency also arrested Rajesh Sharma, chief
executive of Money Matters Group, a specialist loan
arranger that was the go-between for lenders and
corporates and is at the centre of the scandal.
• CBI said Money Matters 'either bribed or attempted
to bribe' bankers to get loans for many companies,
including wind energy developer Suzlon, hill station
township builder Lavasa, and Mumbai developer DB
Realty. The bankers were accused of seeking bribes
of as much as Rs 50 lakh on transactions. CBI did
not share details.
4. Contd…
• News of the arrests, which broke during the closing
hours of trade, hit stocks of some of the companies
involved. Shares in Money Matters led the tumble,
losing 20%, while LIC Housing Finance and DB
Realty lost 19% and 17%, respectively. Central Bank
of India lost 8.1% and Bank of India fell 5.3%.
• These are the biggest and most high-profile arrests
since the Unit Trust of India corruption scandal a
decade ago and the 1992 securities scam.
5. Property prices may crash as
loan scam hits funding
• Liquidity for the sector may dry up as bankers
turn cautious in sanctioning fresh loans, forcing
builders to cut prices to improve cash position,
helping prospective buyers who have been
holding on due to high prices.
6. Contd…
• DB Realty tumbled 10%, India bulls Real Estate
lost 5.2%, DLF fell 3.8%, and Unitech declined
6% as a fund shortage threatens to derail their
project execution, which had just started to show
signs of recovery after the 2008 credit crisis.
7. Contd…
• Banks and financial institutions should strengthen
the NPA (non-performing assets) monitoring and
management in their institutions to ensure that
advance action is taken to identify incipient sickness
and take appropriate action on it
• The arrest of finance sector executives for alleged
corruption and passing on information regarding
these transactions has shaken the banking sector.
8. Contd…
• Borrowing will become more expensive and the
process involved in getting it will get lengthier as
banks increase their vigilance levels.
9. Loan racket a bribery case, can't be
called a fraud: CBI
• The CBI said the cross-country housing loan
racket involving top officials of public and
private sector financial institutions can be called
a case of bribery and corruption but not of fraud.
• The CBI had sought explanation from private
companies who benefited from the alleged cross-
country housing loan racket.
