Housing scam: Regulator allays risk fear

Nair and four senior executives,one each from LIC,Punjab National Bank,Central Bank of India and Bank of India,were arrested by CBI for giving loans to builders and corporates for receiving bribes from Money Matters Financial Services Ltd,a company listed on the BSE that facilitated loans to builders from these banks and financial institutions.

RV Verma,chairman and managing director,National Housing Bank,told The Indian Express that given the nature of the scam,it was beyond the regulator’s purview. “But,we will cooperate with the CBI and look into it closely,if required,” he said.

According to Verma,the regulator discouraged HFCs from taking large exposures to corporates. “The regulation specifically requires HFCs to set aside a minimum of 75 per cent of advances for individuals. Most HFCs today have an exposure of up to 80-85 per cent to individuals and less than 20 per cent to builders and corporates,” he said.

LIC Housing Finance,Verma said,is the second largest player amongst HFCs in the industry,the first being HDFC. “Such high exposure to individuals brings more stability,” he said. But,according to CBI,the way some LIC HF officials have operated will not give the correct picture of the company’s loan portfolio. Several fictitious borrowers have been created with loans taken in their names being diverted to builders. So,on books,these are loans to individuals,but actually they have gone to corporates.

Moreover,Verma said,there are norms relating to the quantum and percentage of exposure these companies can take to individual projects and builders. Also,there are guidelines for appointing and handing out commission to direct selling agents (DSAs) who bring in individual customers.