Top bank officials arrested in loan scam

A new scandal broke on Wednesday with the arrest of the top officials of some of India’s most respected financial institutions, including the government-run LIC Housing Finance.

The Times of India reports:

At least eight top officers of some state-run banks and financial institutions were arrested by the CBI on Wednesday for allegedly accepting bribes to extend loans to corporate houses.

The officials include the chief executive of LIC Housing Finance, a general manager of the Central Bank of India and senior officials of Punjab National Bank and Bank of India, officials at the Central Bureau of Investigation (CBI) told reporters here.

The finance ministry stepped in quickly to salvage the situation, and to try and protect the interests of investors. The DNA reports:

The finance ministry today said the lenders, whose officials were arrested by CBI in connection with the housing loan racket, have submitted reports to the government assuring that investor interest would be protected.

It said LIC Housing Finance Ltd (LICHFL), whose CEO Ramachandran Nair has been arrested in this case, has assured its investors, customers and business associates that all necessary steps would be taken to ensure that interests of various stakeholders are protected.

The Indian Express quoted the CBI as saying that bribes exchanged hands during the sanction of corporate loans:

“The CBI has busted a racket wherein a private financial services company, its CMD and other associates were allegedly bribing senior officials of public sector banks and financial institutions for facilitating large scale corporate loans,” CBI spokesman R K Gaur said in a statement.

“Officers of top management and middle management of various public sector banks and financial institutions viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance Ltd were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions,” he said.

The financial paper Mint wondered if the CBI was trying to regain its respectability by going after financial frauds: “Housing finance scam, credit scam, or the continuation of the Central Bureau of Investigation’s (CBI) attempt to give its image a fresh veneer?”

Two days after arresting seniors officials of the PSU banks, CBI seems to have got a break through. Sources claim that LIC Housing Finace CEO, Ramachandran Nair confessed his wrong doings. According to a report in NDTV,  Nair claims that there are other officials who are also involved in this multi crore realty scam. The Chairman of Life Insurance Corporation of India, TS Vijayan called for an urgent board meeting to discuss this issue. Speaking after the meeting he said,

“Our first priority is to support LIC HFC at this point of time. Towards this we have appointed the senior most general manager Chandrashehakar as the acting CEO. He will be assisted by two other GMs. The process of appointing a new CEO is on and a CEO will be in place in the next two-three days”.