LICHF,PSBs bet Rs 20,000 cr on ‘scamsters’

Although the total exposure of these institutions to the companies seen to have benefited from the irregularity is found to be larger than what was initially assumed,official sources sought not to raise any alarm. The low proportion of bad loans indicates that the loans granted by LICHF and the three state-owned banks are backed by adequate collateral,they said. These institutions have maintained that advances to the beneficiary companies are performing well. Finance ministry officials reiterated that asset quality in the cases under investigation has not deteriorated and that these were isolated instances of alleged illegal gratification. The ministry,though,has already ordered all public sector banks,financial institutions and insurance companies to review their exposure to companies mentioned in the CBI investigation. Despite the large exposure of the four institutions to the real estate companies,the government has not asked banks to tighten funding to the real estate sector.

The government has,however,directed banks and FIs to carry out an independent evaluation of the asset quality,documentation and compliance with prudential requirements on funds provided to beneficiary companies.

On November 24,the CBI arrested eight people and alleged that officers in the top- and middle-level management of banks and institutions were receiving illegal gratification from Money Matters,a private non-banking finance company. It was acting as a mediator and facilitator for corporate loans and other facilities from financial institutions.

The beneficiary companies mentioned by the CBI include Krishna Group,DB Realty,HCC subsidiary Lavasa,Pashmina,Mantri Realty,Sigrun,Entertainment World,Indore City Treasures,Ashapura Minechem,BGR Energy,OPG Group,Adani,JP Hydro,JSW Power,Pantaloon,Adalite,MTECH,Gold Sukh Project and MBD.

Krishna Group has received the highest loan amount of Rs 1,000 crore from the banks and FIs,followed by OPG Group at Rs 330 crore.

Most of the loan transactions under investigation pertain to lending to builders arranged by Money Matters after paying bribes to officials at financial institutions and banks. The CBI was probing the roles of the arrested men in sanctioning housing loans at high interest rates to fictitious customers. The sanctioned loans were then allegedly siphoned off to the accounts of some builders.

The Money Matters stock has been hitting lower circuit limit every day since the CBI arrested its CMD,along with seven other officials. It ended lower 5% at Rs 240 at the BSE on Tuesday,down from a monthly high of Rs 720.

LICHF closed down 2.2% at Rs 1,005 at the BSE on Tuesday,Bank of India down 4.42% at Rs 440.65,Central Bank of India down 2.97% at Rs 186.50 and Punjab National Bank down 2.63% at Rs 1,195.75. Banking sector stocks ended lower on Tuesday on concerns of rising deposit rates and RBI’s comments that banks need to pare their interest margins.

Central Bank of India’s exposure to the real estate sector is about Rs 7,000-8,000 crore,while Punjab National Bank has Rs 9,000 crore.