Mumbai, Nov. 24: As the stocks of LIC Housing Finance, Central Bank of India and Bank of India skid on the news of the arrest of its top officials by the central Bureau of Investigation in a bribes for loans scandal.
However, the finance ministry was quick with its assurance that all housing loans were secure and that the bad loans in the housing sector were minimal and that there was no systemic failure in the banking system.
The finance secretary said that the scam was a case of “individual greed.”
LIC Housing Finance in a statement said all the loans are secured by the underlying assets to the full satisfaction of the approving.
LIC Housing Finance closed down over 18 per cent at `1,070.20, Central Bank of India was down 8 per cent at `198.25 and Bank of India was down 5.3 per cent at `448.65.
Realty stocks took a big hit on Tuesday even as harried promoters and officials of these companies issued denials of any involvement in the scam.
Among the companies mentioned are Ashapura Minechem, DB Realty, Adani group, Suzlon, JSW Power, Lavasa etc.
Money Matters which brokered deals between the corporates and bank officials saw its share drop 20 per cent.
Mr S.Tulsian, stock market advisor said that the banks stocks could see a fall of 8-10 per cent on Thursday.
He said there was no need for bank stocks to take a beating as this did not mean bad loans, but because of the bearish sentiment already existing in the market, the stocks were down.
Banking analyst, Mr Hemendra Hazari said: “if this scam is only a case of bribery then banks will be impacted much less as there is no loss to banks in terms of bank loans. It is only a reputation risk as senior executives have been arrested. ”
The fact that the CBI has not quantified the scam has puzzled analysts who feel that the CBI has unnecessarily sensationalised the whole issue.
One broker feels that there is something much more behind this expose.
Some analysts feel that this was being sensationalised to distract from some larger issues.
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Q Who is Money Matters Financial Services Limited?
The little known financial services firm shot to infamy on Wednesday after it was named as an accused in the financial scam. Earlier in the day, the company had issued a press release saying that CBI officials had ‘visited’ the company’s offices on Tuesday, without specifying the reason for the visit. Later in the day, it emerged that the company’s key officials had been arrested and offices sealed by the CBI as a part of its investigations. A search of their office in Mumbai threw up a few lakh rupees in cash, and interestingly, 189 gold coins. This publication was able to glean some details about the company’s business from its website, before it was taken down. Money Matters lists debt syndication, debt placement and corporate finance advisory as its businesses. This means it helps companies place debt papers such as bonds, debentures etc. with financial institutions such as banks, mutual funds and insurance companies Major clients of the company include Suzlon, Mundra Port and SEZ, Jaypee Group and DB Group.