The government today directed all public sector banks, insurance companies and financial institutions to review their exposure to companies identified by the Central Bureau of Investigation (CBI) for alleged involvement in the real estate loan racket.
The country’s premier investigation agency today served notices on the 18 companies it named in the first information report, asking them to submit details of the loans taken. Representatives of these companies visited CBI offices through the day, furnishing their loan details.
On Wednesday, CBI unearthed a real estate loan racket and arrested senior executives of LIC Housing Finance, Bank of India, Central Bank of India, Punjab National Bank — all state-owned entities — and Money Matters Finance Services. Money Matters, a non-banking financial company specialising in debt syndication, allegedly bribed the executives to secure favourable terms for its clients. Other companies named by CBI are DB Realty, Pashmina, Mantri Realty, Sigrun, Entertainment World and Indore City Treasures.
Finance Minister Pranab Mukherjee, who met R Gopalan, secretary to the department of financial services, to review the situation, said the institutions should carry out an independent evaluation of the asset quality and documentation related to the companies named by CBI, and their compliance with prudential requirements.
Mukherjee said the board of directors of the banks and financial institutions should carry out a fresh assessment of their non-performing assets and strengthen their monitoring and management. He asked Gopalan’s department, as well as regulatory authorities and institutions to immediately review and strengthen the procedures.
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Revenue Secretary Sunil Mitra said the income-tax department would also be looking into the scam. The department is likely to examine the tax returns of all the eight executives arrested and may seek information on the returns of the companies under investigation.
Speaking in Pune, Reserve Bank of India Governor D Subbarao said the loan disbursement mechanism should always be transparent. “There needs to be more transparency and accountability in loan disbursement and we are continuously working on it,” he told reporters while refusing to give specific comments on the CBI crackdown.
Already, the government’s words are finding an echo. “The risk management of the bank will be further strengthened,’’ said Bank of India Chairman Alok Misra. “We will study the episode in depth to determine if more bank officials were involved.’’
Central Bank of India of India will also review its systems. “We are always looking to make changes, whether with respect to customers or technology,” said Chairman & Managing Director S Sridhar.
State Bank of India Chairman Om Prakash Bhatt took the same line as that of the finance ministry yesterday, saying: “It is not a systemic issue.”
LIC Chairman T S Vijayan said there had been no damage to its asset quality. “We are trying to conduct an internal enquiry into this matter. CBI has requested for some files. The outstanding amount (from) these companies was Rs 380 crore,” he added.
LIC Housing Finance gets a new CEO
V K Sharma, 50, manager in charge of the south zone for Life Insurance Corporation of India, has been appointed the new CEO of LIC Housing Finance. His predecessor, R R Nair, is under investigation by the Central Bureau of Investigation for allegedly accepting bribes from Money Matters Financial Services and showing undue favour to its clients.