LOANS UNDER PROBE ARE BACKED BY SECURITY: LIC HOUSING

The loans of LIC Housing Finance that are under scrutiny by the CBI are backed by securities worth more than the outstanding loan amount.

In a press release issued on Monday, the housing finance company said the outstanding loans related to cases under scrutiny by the Central Bureau of Investigation amount to Rs 389 crore; these are performing loans, and the value of securities against these loans amount to over Rs 1,000 crore.

The company's loan portfolio as on October 31 was Rs 44,569 crore and its gross NPA was 0.75 per cent, including project loans.

In its board meeting held on Monday, LICHF also approved the appointment of Mr V.K. Sharma as Director and Chief Executive following the arrest of the former chief executive, Mr R.R. Nair, in a bribe-for-loan case.

Speaking to reporters after the board meeting, Mr Sharma said that the primary agenda will be to review the situation and take appropriate action. “The Board has clearly deliberated the situation. No investor needs to panic,” he said.

Audit panel

According to LICHF's press release, the Board observed that the preliminary report prepared by the Committee of General Managers, which was constituted to examine the cases under scrutiny, confirmed that the loans are performing and that documentation is in order.

The audit committee has also been authorised to go through the General Managers' report and other relevant aspects in detail and give suggestions for further strengthening of internal systems and controls, if required.

Prior to his appointment as LICHF's head, Mr Sharma was the Zonal Manager of the South Zone of LIC of India.

The CBI had on November 24 arrested eight senior officials of banks and financial institutions on charges of taking bribes for sanctioning loans. Mr Nair was accused of having received a bribe of Rs 45 lakh from Money Matters and of providing undue favours to companies such as DB Realty, Mantri Realty, Entertainment World (Lucknow), Indore City Treasures and Pashmina Developers.

Rating

Meanwhile, Crisil reaffirmed its ratings on LICHF's debt instruments and fixed deposit programme at ‘AAA/FAAA/Stable/P1+'. The rating reaffirmation centrally factors in the continued support that LICHF is expected to continue to receive from its largest shareholder, the Life Insurance Corporation of India, Crisil said in a press release.

SOURCE: http://www.thehindubusinessline.com/2010/11/30/stories/2010113053660600.htm