Govt has said the housing finance racket unearthed by the CBI, leading to the arrest of the CEO of LIC Housing finance and other senior officials of public sector banks, is a bribery case involving some individuals and not a large-scale scam.

“It’s an individual case of bribery. There is no large-scale scam. Banking system is sound,” Minister of State for Finance Namo Narain Meena told reporters in New Delhi on Wednesday.

He added, “NPAs (non-performing assets) are minimal in housing loans — less than one per cent. There is no impact on asset quality of banks”.

Meena said the exposure of loans to builders is 11-12 percent of total housing advances.

To a query over tanking of banking stocks today, he said markets are governed by many factors, including global cues.

“I don’t think, it (housing finance racket) will affect it (stock markets) much,” he added.

Earlier in the day, Central Bureau of Investigation (CBI) arrested LIC Housing Finance CEO Ramachandran Nair and seven others senior bankers in connection with a housing finance racket.

Apart from Nair, those arrested are Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India, Venkoba Gujjal and Dy General Manager of Punjab National Bank (Delhi).

Rajesh Sharma, CMD of Mumbai-based firm Money Matters Ltd and two of its employees — Suresh Gattani and Sanjay Sharma– were among those arrested.

The bank officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

Meena said concerned banks will take action against the erring officials.

Reacting to the arrest of its chief, LIC Housing Finance issued a statement saying it had followed all necessary procedures while approving loans.

Meanwhile, the Department of Financial Services has called reports from these institutions.

As per the reports, LICHFL also assured its investors, customers and business associates that all necessary steps would be taken to ensure that interests of various stake holders are fully protected.

Central Bank has said there is no impact of the development on asset quality, the reports added.

CMD of PNB has said that there is no information linking the above incidence to any loan account of the bank, according to reports received by the Department.

Searches were conducted at various locations in Mumbai,Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents, the investigating agency said, adding it registered five separate cases and investigations were in progress.

CBI arrests CEO of LIC, unearths housing finance racket

The CBI arrested CEO of LIC Housing Finance Ramachandran Nair and seven others including three top officials of public sector banks in connection with an alleged housing finance racket.

Apart from Nair, those arrested are Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India, Venkoba Gujjal and Deputy General Manager of Punjab National Bank (Delhi).

Rajesh Sharma, Chairman and Managing Director of Mumbai-based firm Money Matters Ltd and two of its employees — Suresh Gattani and Sanjay Sharma– were among those arrested, CBI said on Wednesday.

The officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

“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,” CBI spokesman R K Gaur said in a statement.

“Officers of top management and middle management of various public sector banks and financial institutions viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance Ltd were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions,” he said.

“They were also gathering confidential business information from financial institutions,” Gaur said.

Searches were conducted at various locations in Mumbai,Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents.

The CBI has registered five separate cases in this regard and investigation is in progress, the spokesman said.