Builders may have benefited from fake home loans of LIC Housing Finance and banks
Moneylife Digital Team 24 November 2010

LIC Housing Finance and banks are suspected to have given fake loans to individuals which landed in the accounts of a few builders. The deals were supposed to have been arranged by FII-funded Money Matters Financial Services

Following the raids by the Central Bureau of Investigation (CBI) on Money Matters Financial since last night, news that was broken by this website early today (Money Matters Financial raided by Central Bureau of Investigation), the CBI conducted raids on LIC Housing Finance (LICHF) and three banks during the day.

The CBI said it busted out a racket where a private financial services company, its chairman and managing director (CMD) and other associates were bribing senior officials of public sector banks and financial institutions for facilitating large scale corporate loans. They were also gathering confidential business information from financial institutions.

Officers of top management and middle management of various public sector banks and financial institutions, Bank of India (BoI), Central Bank of India (CBoI), Punjab National Bank (PNB), Life Insurance Corp of India (LIC) and LICHF 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, the CBI said in a release.

The investigation agency said it arrested R Ramchandran Nair, chief executive-LICHF, Naresh Chopra, investment secretary-LIC, RN Tayal, general manager-BoI, Maninder Singh Johar, director-CBoI, Venkoba Gujjal, deputy general manager-PNB as well as Rajesh Sharma, CMD-Money Matters and Sanjay Sharma and Suresh Dattani, both employees of Money Matters. All the eight arrester persons are remanded to custody till 29th November, CBI said.

Moneylife learns that officials of LICHF, BoI, CBoI and PNB had given out housing loans to a few hundred individuals, who were dummy borrowers. These borrowers existed only paper and were propped up by a few builders. The money was then transferred from the accounts of these individuals to these builders. It also appears that LICHF was charging a high rate of interest for these fake loans which was reflected in higher profits.

Driven by high profits over the last few quarters, the LIC Housing Finance stock has been a spectacular performer over the last 20 months. From a low of Rs178 at the end of March 2009, the stock had hit Rs1,496 on 29th September this year, a rally of over 1000%. Over the same period, market leader Housing Development Finance Corporation (HDFC) rose from a low of Rs223 to a high of Rs780, a gain of 350%.

As rumours of the LIC HF scam surfaced, the stock took a big battering. By the end of the day, it was down 18% and there were no buyers for the stock. Since the Moneylife report early morning, the Money Matters Financial stock too was sold heavily during the day and the stock was locked in the lower circuit. It appears that the cases of Money Matters and LIC HF and the banks are linked. CBI suspects that Money Matters was arranging these deals between the banks and the builders. According to our sources, bank officials and others were being gifted 2 kilograms of gold this Diwali.

It may be recalled that less than two months ago, Money Matters raised more than Rs400 crores foreign institutional investors, a deal arranged by India Infoline. 

Comments
Rajkumar Singh
10 years ago
Many thanks are overdue to Moneylife and always for its painstaking investigative journalism.

But on the other hand I am a bit confused and suspicious.

Ever since I followed the articles of Madam Sucheta Dalal, I never became a gullible or innocent investor?

Thanks once again for aligning and making me a member of your organisation.
Shibaji Dash
1 decade ago
Thank you Mr. Basu for such quick and investor-friendly response that also serves larger public interest.The upswing of the ' high' of LIC HFC between Jan 2010 at Rs. 855/- and Rs. 1305/- in October 2010 as well as the corresponding "low' and ' close' price ( per BSE 'Archive' ) prior to the CBI action , will remain unfathomable unless and until the realty is unravelled and put in the public domain by the authorities concerned. concerned.
Shibaji Dash
1 decade ago
In doing the 20 month comparative at Para 7 of the commentary, the Moneylife Digital Team, one hopes, has reckoned with the fact that HDFC split its share from Rs. 10/- to Rs. 2/- wef 21August 200 while the FV of LIC HFC share continues to be Rs. 10 ; that summarily speaking but for the split the current market price of HDFC share should have been in the range of 5 times what it is( ie Rs 3000/- to Rs 3500/-) ; that the Quarter 2 net profit of LIC HFC rose by 37% to Rs 234.21 crores ; that the EPS of HDFC for March 2010 ( before the split ) was 19.69 where as the EPS of LIC HFC for the same period was 69.75. These infos are available in the websites of both the companies and @ rediffmail.com (money).My insstantaneous comments 1 hour ago needs to be read down accordingly. This is no defence for any one. The investigation commenced by the agencies/regulators must be expeditiously but impartially concluded to punish the guilty as per procedure established by law . In the event of delay or silence the very timing and objective of the enforcers may come under avoidable scrutiny. Pl. see the views of Mathur/ Lata Venkatesh/ Singvi @ moneycontrol.com.
Debashis Basu
Replied to Shibaji Dash comment 1 decade ago
We always use split and bonus adjusted prices. This available automatically from the software on price data that we buy.
Shibaji Dash
1 decade ago
The comparative of upswing in share prices of HDFC and LIC HF in the 7th para of the commentary of Moneylife Digital Team is stunning indeed warranting extensive and intensive research by all the regulatory and enforcement agencies to understand the phenomenon and uncover the truth- though a 20 month time frame may be an arguable proposition. Until now HDFC is known for the genuine due diligence they do in tying up any loan contract. One feels so sorry to see the name of LIC, the principal, being enmeshed in such a smelly controversy, perhaps the 1st one after the Chagla Commission inquiry((popularly then known as the Mundhra scandal) in the fifties of the twentieth century.
PCCHACKO
1 decade ago
LICand its subsidiary LICHF had a vwery good reputaion and clean image Few officials tempted by money matters have spoiled that for peanuts It is shameful for those offiers involved.Media is giving big publicity and stock market was over reacting on this issue
Shibaji Dash
1 decade ago
If you charge interst @ 8 and 1/2 % from ' individuals borrowers ' and 19% from the builders, you are providing a leveraged incentive for builders to forge documents. And with the criminal justice administration being ineffective fear of conviction & imprisionment is nonexistent. Remember the loot from the differential between price of levy sugar and open market sugar. For that matter, mixing of kerosene with diesel or petrol ? Incidentally, what's the status of the accused in the Harshad Mehta case , now that nearly 2 decades have lapsed since it happened?
ca sunil mone
Replied to Shibaji Dash comment 1 decade ago
sir i want your res address so that i can send you some corrospondence of interest. even office address will do. ca sunil mone
Brahma
Replied to Shibaji Dash comment 1 decade ago
India will be the No 1 nation, leading the leadership of Corruption. Out of 16 CJs, 8 are corrupt, so what we can expect out of the Judiciory.
aX
1 decade ago
Axis Bank is a fat balloon with an overexposure to Infrastructure projects including that of HCL, Lavasa, Suzlon, Alok Ind, Mundra Port and few other big names in construction industry. Look at its recent deal with ENAM

CBI should conduct the inquiry against the Ex DMD and other senior officials including the present DMD, Executive Directors, Board of Directors, and President - Risk for their vested interest in financing to this project and holding disproportionate wealth they have accumulated in their family members name.

Money Matters Financial Directors including other officials Mr Pawan Bansal ( ex employee of Axis Bank as reported in today economic times ) and company accounts are being operated through Axis Bank

CBI Economic Offence Wing is already doing the inquiry in to similar type of fraud in Priority sector lending of 150 crores at Bhopal and Jabalpur and also at other major centers.

They were also involved in multi crore contract farming fraud similar to LICHF i.e landing on a fake KYC documents without the existence of that person. The bank has 1200 plus crores of exposure to Microfinance Companies which is deteriorating its asset quality.

The senior functionaries of the banks are putting up papers or they are being moved to other non performing departments. One side the bank is giving the suspension / termination letters to employees and other side they are accepting the resignation letters from those suspended senior employees and giving them relieving letter. Its an eyewash to the general public, and our role is to educate the investors and protect their interest. Its upto you to take a call.
R Govindarajan
1 decade ago
Thinking that lichf would go up, I have bought some shares of it. Will there be any chance for the share to reach back to the up trend position or not is the only bothering thing to me.
If i am able to get some valuable views, it would be of great use to me.
nn bala
Replied to R Govindarajan comment 1 decade ago
It depends on your risk appetite. If you have limited risk appetite, sell your shares as soon as the market opens up tomorrow. This way you can minimise the loses. Else you may have to wait for a long time. Satyam shares touched Rs 12 when the scam broke out and it has taken about 2 years to reach the level of around Rs 100.
Ax
Replied to nn bala comment 1 decade ago
One of the leading private sector banks has overexposed itself by financing various Infrastructure projects including that of LAVASA. CBI should conduct the inquiry against the Ex DMD and other senior officials including the present DMD, Executive Directors and President - Risk for their vested interest in financing the project and holding disproportionate wealth they have accumulated in their family members name
NN Bala
1 decade ago
Many stock market experts have been recommending to buy the LIC Hsg Fin stock over the last 1 month !!!
BEIP FORUM
1 decade ago
Which is the next financial institution after LICHF? Is it not the Private Banks?

Bankers have gone beyond the Laxman Rekha, with a sole aim to create personal wealth by over financing the corporate and individuals by adopting all types of unethical and fraudulent practices. Lets wait and watch how long they will be able to escape from the scanners of CBI, EoW & CVC, as the Bank Management has failed to implement the concept of Staff Accountability and Corporate Governance in its true spirit since inception and they want to loot the investors / depositors money for personal benefits.

http://www.caclubindia.com/blog/letter-f...

http://moneylife.in/article/9/11334.html...

http://www.moneylife.in/article/5/11287....
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