Housing finance racket a very small incident: Montek Singh Ahluwalia

The plan panel today termed the housing finance racket, involving the chief of LIC Housing Finance and several other officials of PSU banks, as a "very small" incident as far as banking system as a whole was concerned.

The reaction from Planning Commission deputy chairman Montek Singh Ahluwalia comes a day after the CBI arrested LIC Housing Finance CEO Ramachandran Nair and seven other senior bankers on charges of corruption and criminal conspiracy.

"I do not think we should make too much of a particular incident (housing scam)...the scale (size of the scam) we are talking about... is very small as far as banking system as a whole is concerned," Ahluwalia told reporters.

He said he was sure that the authorities concerned have taken steps against the involved party and the banking system to send out the right signals.

"I think our banking system is pretty well regulated. Both the RBI and the ministry (finance), I am sure, are doing whatever is necessary to sent the right signal," he said.

Last last night, the finance ministry had said that the housing finance racket was a bribery case involving some individuals and not a large-scale scam and that the banking system was sound.

"NPAs (non-performing assets) are minimal in housing loans - less than one per cent. There is no impact on asset quality of banks," minister of state for finance Namo Narain Meena had said.

The finance ministry had yesterday sought details of housing finance racket from LICHFL, Bank of India, and Punjab National Bank.

As per the reports, LICHFL 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 was no impact of the development on its asset quality.

According to the CBI, the bank officials allegedly colluded with Mumbai-based firm Money Matters Ltd to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

Rajesh Sharma, CMD of Money Matters and two of its employees - Suresh Gattani and Sanjay Sharma - were also among those arrested.

Those others arrested by the CBI include Naresh K Chopra, secretary (investment), LIC, RN 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).