The top management of several public sector banks could be put under the scanner to probe possible links to the housing loan scam.
Banking industry sources say that because the loans that were illegally given are worth several hundred crores in many cases and these large loans can not be given with just a manager-level officer’s signature.
“It may not be possible to sanction huge loan amounts without the approval and verification of the boards and there could be a possibility that there is involvement of the top management,” a senior executive at a public sector bank told HT on condition of anonymity.
Top executives of Punjab National Bank, Central Bank of India Bank of India and
LIC Housing Finance have allegedly been involved in the bribery case.
Industry sources said in most occasions, the top managements and boards need to ratify large loan amounts.
This reported move comes even as banks are trying to restore confidence while maintaining the housing loan scam was a case of bribery and not a systemic failure.
A government source said incentive based remuneration of chairmen and executive directors of public sector banks could suffer significantly in the wake of the housing scam.
On Friday, finance minister Pranab Mukherjee said banking and financial institutions have been advised to look into all these issues to ensure that institutions’ money is safe.
A finance ministry official said generally banks have always followed the required procedures while sanctioning loans. A senior executive of Central Bank of India said the bank has rejected a R100 crore loan application by a real estate company on Thursday, thanks to the scam.
The total exposure of the banking industry to the real estate sector is estimated at around R2,000 crore. The Reserve Bank of India has also indicated it would have a relook at the regulatory guidelines relating to lending to the real estate sector.