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Stocks tank on sell-a-loan scam

business Updated: Nov 25, 2010 02:18 IST
HT Correspondent
HT Correspondent
Hindustan Times
BSE benchmark

As if Adarsh and 2G were not enough, another scam hit the country on Wednesday, showing the ugly nexus between senior banking officials clearing large loans to companies by accepting bribes.

Central Bureau of Investigation (CBI) arrested at least eight officials of public sector banks and financial institutions on charges of taking bribes to grant large corporate loans.

It was a typical case where officials at Money Matters, working as an agency, allegedly bribed senior officials of public sector banks and financial institutions such as Life Insurance Corporation (LIC), LIC Housing Finance, Central Bank of India, Punjab National Bank, and Bank of India for approving large loans. Money Matters was allegedly working for major real estate firms. In return the bank official allegedly received kick backs.

The news impacted the stock market adversely.

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) fell 232 points or 1% to close at 19459.8. Led by Money Matters that plummeted by 20% and LIC Housing Finance that fell 18%, prices of all the companies linked to the scam crashed.

LIC Housing Finance said all the loans were above board. "All procedures and due diligences consistent with board approved guidelines have been adhered to in approving the loans. All loans are secured by the underlying assets to the full satisfaction of the approving authority. As on date all loans in question are performing assets."

"We do not have the full information as we have not received the communication from CBI on this matter," a senior Bank of India official told Hindustan Times. "The bank will take appropriate action." Biggies reel as heads arrested