lic housing finance

by Nithya 2010-11-24 21:16:38

India's federal investigating agency said it arrested Ramachandran R. Nair, chief executive officer of LIC Housing Finance Ltd., and officials of some state-run banks following a probe into bribes and improper loan disbursals.

Rajesh Sharma, chairman of Mumbai-based brokerage Money Matters Financial Services Ltd., was also taken into custody, P. Kandaswamy, the Central Bureau of Investigation's inspector general for Mumbai Zone 2, said in Mumbai today. Some executives at the Life Insurance Corp. of India, Bank of India, Central Bank of India and Punjab National Bank were also arrested.

"This will definitely dent market confidence and the credit-worthiness of financial institutions," said Gurunath Mudlapur, director at Atherstone Capital Markets Ltd., which provides investment banking services in Mumbai. "Financial institutions are meant to be driven by trust and transparency."

Shares of LIC Housing dropped a record 18 percent to 1,070.2 rupees at the 3:30 p.m. close of trading in Mumbai, before the announcement. Money Matters fell by its 20 percent limit to 533.80 rupees. The benchmark Sensitive Index slumped 1.2 percent as DLF Ltd. led Indian real estate stocks lower.

LIC Housing spokesman Sudipto Sil wasn't immediately available for comment. Vipin Anand, chief of corporate communications at Mumbai-based Life Insurance Corp., the nation's largest insurer, didn't reply to an e-mail or phone call seeking comment.

'Busted a Racket'

"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," according to the agency's statement. "They were also gathering confidential business information from financial institutions."

The eight arrested by the CBI included R.N. Tayal, general manager at Bank of India in Mumbai; Maninder Singh, a director at Central Bank in New Delhi; Venkoba Gujjal, deputy general manager of Punjab National Bank in New Delhi; Suresh Gattani of Money Matters, and the secretary for investments at LIC, Kandaswamy said.

Executives at the state-run banks and companies were "receiving illegal gratifications," according to the statement. Money Matters was acting as a mediator and facilitator for corporate loans and credit extended to builders, Kandaswamy said.

Central Bank's Singh is a part-time director appointed by the government of India, S. Sridhar, chairman and managing director of the Mumbai-based lender, said by telephone.

"I have no reason to believe this will affect the bank," Sridhar said. "We haven't done anything out of the ordinary; the CBI has not approached me or any of our offices."

K.R. Kamath, chairman and managing director of Punjab National Bank, couldn't be reached at his office in New Delhi. Alok Kumar Misra, chairman and managing director of Bank of India, wasn't available for comment at his office in Mumbai.

LIC Housing's Nair, Sharma of Money Matters and Tayal of Bank of India were remanded to custody until Nov. 29, a judge at the CBI court in Mumbai said today.

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