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Did excess loans go into stock market?

The Central Bureau of Investigation (CBI) is coordinating with the Securities and Exchange Board of India (SEBI) to find out which of the companies accused in the cash-for-loans scam have diverted the money to the stock market.

business Updated: Nov 27, 2010 01:15 IST
Manish Pachouly

The Central Bureau of Investigation (CBI) is coordinating with the Securities and Exchange Board of India (SEBI) to find out which of the companies accused in the cash-for-loans scam have diverted the money to the stock market.

The CBI has learnt that some of the 21 companies whose names figure in the first information report (FIR) have diverted the excess loan amount to the stock market.

The companies had taken huge loans, much more than what they required for their projects, allegedly by paying bribes to senior bank and Life Insurance Corporation of India (LIC) officers.

The companies got these loans with help from Money Matters, a financial services firm. The bribes were allegedly paid through Money Matters.

A CBI officer, requesting anonymity because he is not authorised to speak to the media, said the agency has got clues about five companies that have diverted the loan amount to the stock markets.

“We are getting details of investments by these companies with the help of SEBI and the Bombay Stock Exchange,” the officer said.

“We are looking into this aspect,” P Kandaswamy, head of CBI’s Mumbai Zone (II) said when asked whether the loan amount may have been diverted to the stock market.

The CBI is also planning to expand the scope of investigation to find out whether any other bank indulged in similar practices.

Special director of CBI, Balwinder Singh, visited the Economic Offences Wing of the CBI on Friday to review the progress in the case.

He said this was a clear case of bribery and the CBI was involving various agencies in the probe because this was an organised racket.

Singh said the CBI is getting more information on each of the companies named in FIR.

The CBI also continued raids on the premises of the arrested accused on Friday to search for more incriminating evidence.

The Enforcement Directorate will also participate in the probe to find out if there was any money laundering.

The CBI has arrested Naresh K Chopra, secretary (investment) LIC, Mumbai, Ramchandran Nair, director and CEO, LIC Housing Finance, Mumbai, RN Tayal, general manager, Bank of India, Chennai, Manindersingh

Johar, director, Central Bank of India, New Delhi, and Venkoba Gujjal, deputy general manager, Punjab National Bank, Mumbai.

The CBI has also arrested Rajesh Sharma, chairman and managing director, Money Matters, Mumbai, and Suresh Gattani and Sanjay Sharma from Money Matters, Mumbai.