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Loan scam a case of graft, not fraud: CBI
Published on 27 Nov. 2010 12:07 AM IST
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The alleged loan scam that resulted in the arrest of senior officials in some banks and financial institutions are individual cases of graft and not fraud, the Central Bureau of Investigation said Friday, implying the system as a whole was not compromised.
“I would like to clarify, it is not a fraud case as on today. Later on investigation may reveal that, but as on today it is primarily a case of bribery and corruption,” Balwinder Singh, special director of the CBI, told reporters here.
The CBI arrested senior officials of LIC Housing Finance, LIC, Bank of India, Central Bank of India and Punjab National Bank Wednesday for allegedly accepting bribes to extend loans to corporate houses in a housing finance scam.
Among others arrested was Rajesh Sharma, chairman and managing director, and two executives of Money Matters Financial Services -- a Mumbai-based listed firm.
All the accused have been charged under the Prevention of Corruption Act and remanded to custody till Nov 29.
The CBI’s comments are in line with what top government officials have been saying.
Banking Secretary R. Gopalan had said the amount involved in the graft cases was insignificant, looking at the financial sector as a whole. “It’s a case of individual greed not a systemic failure,” Gopalan said.
The agency also dispatched letters seeking explanation from at least 15 firms against which it claimed to have unearthed incriminating evidence.
On asked whether companies that were beneficiaries of the loans would be called in for questioning, Singh said, “We have got some documents. We will not be calling the companies right now. We will scrutinise the documents first.
“Right now we are pursuing what is there in the FIR (first information report). Once that is over we will go ahead,” added Singh.
Bankers defend
loans sanctioned
Bankers have defended the loans given to companies named in the CBI charge sheet in connection to the bribes for loan scam saying these were performing loans and were sanctioned after due process.
In its chargesheet, the CBI had named officials from the Bank of India, Punjab National Bank and even a board member of Central Bank of India for allegedly accepting bribes to sanction loans, causing worries that the loans were sanctioned to non-credit worthy borrowers.
However, the bankers contended that loans cannot be sanctioned by any single officer and their processes ensure that all loans are sanctioned after proper due diligence, reports CNN-IBN.
“These are three accounts - BGR Energy, OPG Power and Ashapura Minechem. I would like to say that BGR Energy is a well conducted satisfactory account. OPG Power, though sanctioned is yet to be disbursed and Ashapura Minechem is an account which is with us for over 40 years. This is a misconduct of an individual but let me clarify that there is a due process for sanctioning of all loans,” said Alok Kumar Mishra, Chairman, Bank Of India.
“I don’t think there is going to be an asset quality impact on account of this because whatever loans that have been sanctioned, the banks have sanctioned after following all due processes and in the ordinary process of business. I don’t foresee any impact of this on the asset quality,” said KR Kamath,” said KR Kamath, CMD, Punjab National Bank.
The chief of the Indian Banks Association and chairman of India’s largest public sector bank also agreed that it was not a systematic failure.
“It is not a systemic risk issue, this is not something where something has happened on a very wide scale. All banks have policy procedures in place for risk management or risk assessment and I believe that all banks are always fairly prudent in all these procedures of assessment and that will continue,” said the SBI chairman.
However, the issue may mean that it may take more time for loans to be sanctioned from now on. Both the Finance Ministry and RBI have asked the banks mentioned in the CBI report to disclose just how much was granted as loans by the arrested officials.

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