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Journalism of Courage
Barely three weeks before he jumped to his death from the terrace of a 11-storey building in Pune, 46-year-old IT professional Prabhat Ranjan was part of a group of people, all victims of the Rs 300-crore “profile investor” scam allegedly perpetrated by Ashtavinayak Investment, which approached the City Police Commissionerate. The group submitted a list of pleas: speed up the investigation, help against “harassment” by loan recovery agents, and probe alleged collusion between bank staff and the scamsters.
On July 17, four days after Ranjan committed suicide citing his troubles, the Economic Offences Wing (EOW) wing of the Pune Police arrested three Pune residents, Prasad Shinde, Ajay Khadse and Nitin Shinde, for their alleged role in the scam. The main face behind Ashtavinayak, Selva Nadar, is yet to be traced.
Meanwhile, the other key demand of the victims remains an open question.
In a letter submitted to the commissioner, the victims wrote: “Bank officials and Selva Nadar got approval on our loan applications within 1-2 days and (the loans that were used to invest in Ashtavinayak) were disbursed on the same day. The bank staffers would often nudge the prospective clients to become Selva’s client and vouch for the safety of the investment. The money disbursed in our accounts was immediately taken out by Ashtavinayak Investment, Selva Nadar and other accomplices by using the signed cheques that they had collected from us in advance. We never used the loan money.”
When contacted by The Indian Express, Ranjan’s wife Neha confirmed that he had visited the Police Commissionerate on June 24 and 27. Ranjan was one of the 273 individuals from Pune and nearby cities who were allegedly defrauded by Nadar’s investment firm into taking personal loans from several banks simultaneously and handing the money over to the firm for investment. Nadar shut the firm and absconded with his family in February 2023.
Speaking to The Indian Express, a senior officer said that while the police cannot order the banks and NBFCs to stop the recovery procedure, they have requested some of them to go easy on the victims.
Police sources said their investigation has found “some lapses” in procedure while sanctioning a section of the loans, and more information is being gathered. “We have recorded the statements of 60-70 fraud victims and have obtained bank documents. This is a very complex crime and such a probe takes longer than the usual criminal investigation,” said an officer.
The police have so far identified 27 banks and NBFCs that were tapped for loans. Of these, The Indian Express was able to reach eight banks and seven NBFCs. Six of them — HDFC Bank, HSBC, Yes Bank, IDFC Bank, Aditya Birla Finance and Shriram Finance — responded but declined to provide any information on the case.
However, officials from some of the banks spoke to The Indian Express on the condition of anonymity and rejected the allegation of collusion. They said, however, that Selva’s firm may have exploited loopholes in the banking system and procedural concessions that are granted to “privileged clients” with “high incomes and trusted employers”.
“Banks rely on credit information companies to check the credit history of loan applicants. When bankers log queries with these companies for loan applicants, they immediately get to know if the applicants have made loan inquiries with other lenders, too, but not if a loan was sanctioned and disbursed. The loan disbursal data is sent to credit information companies only at the month-end. Before sanction, bankers ask applicants if they have received loans from other lenders. They also check bank statements for three months submitted along with the applications. But they wouldn’t be able to know about loans that were disbursed after these statements were submitted,” said a senior official with a major private bank.
In short, multiple bank officials said, Ashtavinayak’s clients allegedly received loans from multiple banks at the same time with each bank unaware about the other disbursal.
Asked about the victims’ allegations of “quick loan disbursals without address verification”, bank officials pointed to “competition in the loan market” among banks, NBFCs and fintech companies.
“Direct Selling Agents (DSA), or third-party entities that are appointed by banks to sell products including loans, have expertise in preparing loan files and hence files that come through DSAs get processed faster. Processing and disbursing loans in a short time is the USP of private banks and NBFCs. It’s not something to frown upon. Personal loans, especially, are supposed to be processed with minimal turnaround time (TAT),” said an official with a Mumbai-based NBFC.
Banks and NBFCs have different policies for physical verification, the officials said. “For most lenders, physical verification is a must for loans above Rs 20 lakh. These days, some banks do video KYCs or contact point verification (CPV) through third parties. There’s no physical verification for loans below Rs 5 lakh, which are processed on income, employment evidence and credit history. The role of human discretion has gone down as most processes are automated,” said the senior private bank official.
“It’s clear from the way Selva Nadar operated that he had studied the functioning of banks and was aware of the loopholes. He had hired people who could exploit those loopholes,” said a senior official with an NBFC.
Bank officials said they are treating these loans like any other and that their agreement was with the clients and not the DSA. “They (the scam victims) have taken loans beyond repaying capabilities by mis-stating their situation and hiding information. They have worked in collusion with Ashtavinayak. Now they have banded together and have hired lawyers. Our legal teams will proceed on these cases in the same way they do in other cases of defaults,” said an official with another NBFC.
