LIC Housing Finance CEO Arrested, Major Coporate Loan Scam Busted

The CEO of LIC Housing Finance Ramachandran Nair was on Monday arrested by the CBI in a case that shook the stock markets but was later down played as an individual case of bribery for facilitating “ large scale corporate loans”. Nair was among eight persons arrested by the CBI as investigation teams fanned out across multi city locations and ransacked the offices of bankers, financiers and others, and registered as many as five cases.

Among those arrested by the CBI was the Chairman and Managing Director of a private financial company called Money Matters Financial Services Limited, Rajesh Sharma, two of his colleagues, Suresh Gattani and Sanjay Sharma, and four high level managers of top public sector banks.

The arrested bankers were Naresh K Chopra, Secretary ( Investment), LIC; R N Tayal, General Manager of Bank of India ( Delhi); Maninder Singh Johar, Director ( Chartered Accountant) of Central Bank of India; and Venkoba Gujjal, Dy General Manager of Punjab National Bank ( Delhi).

All the accused were booked under the Prevention of Corruption Act. The raids in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar had their impact on the stock market in Mumbai, where the Sensex suddenly slipped into the red. It closed the day down 1.18 per cent at 19459.85, a fall of 232 points.

The CBI said it was a thriving racket in which officials of the private financial company bribed bank officials to secure huge corporate loans, apart from gleaning confidential business information. The information was reportedly related to investment decisions in specific stocks by large financial institutions, which was sensitive and would enable traders to unfairly play the market.

“ Officers of top and middle management of various public sector banks and financial institutions were receiving illegal gratification from the private financial services company, which was acting as a mediator and facilitator for corporate loans,’’ the CBI said in a statement.

The raids led to fears of deeper linkages that could spook the stock markets, which are already trading nervously in the midst of the Korean flare- up, the European financial crisis and the telecom scam.

But in the evening the government announced that the arrests were in a case of bribery and would not impact the asset quality of the banks. “It’s an individual case of bribery. There is no large- scale scam. Banking system is sound,” Minister of State for Finance Namo Narain Meena told reporters in New Delhi.