CBI records DHFL in ‘biggest’ bank fraud of Rs 34,615 crore; 17 banks affected

The CBI has booked Dewan Housing Finance Ltd, its former CMD Kapil Wadhawan, its director Dheeraj Wadhawan and others for bank fraud of Rs 34,615 crore, making it the biggest such case probed by the agency, have officials said Wednesday.

Following the registration of the case on June 20, a team of more than 50 agency officials on Wednesday carried out coordinated searches of 12 premises in Mumbai belonging to defendants on the FIR list, which also include Sudhakar Shetty of Amaryllis Realtors and eight other builders.

The action follows a complaint by Union Bank of India (UBI), lead manager of a 17-member consortium of lenders which had provided credit facilities worth Rs 42,871 crore between 2010 and 2018 .

The bank alleged that Kapil and Dheeraj Wadhawan, in a criminal conspiracy with others, distorted and concealed facts, committed criminal breach of trust and misused public funds to deceive the consortium to the tune of Rs 34,614 crore in not not repaying the loans from May 2019.

The audit of DHFL’s accounting books showed that the company allegedly committed financial irregularities, embezzled funds, fabricated books, misappropriated funds to “create assets for Kapil and Dheeraj Wadhawan” using public money.

Both are in custody in connection with previous fraud cases against them.

The DHFL loan accounts were declared non-performing assets at different times by the lending banks, they said.

When DHL was investigated in January 2019 after media reports of embezzlement allegations, the lending banks held a meeting on February 1, 2019 and appointed KPMG to conduct an “audit of ‘Special Review’ of DHFL from April 1, 2015 to December 31, 2018.

The banks also issued a Look Out circular against Kapil and Dheeraj Wadhawan on October 18, 2019 to prevent them from leaving the country, they said.

The UBI alleged that KPMG, in its audit, reported misappropriation of funds in the form of loans and advances to related and interconnected entities and individuals of DHFL and its directors.

Examination of the books of accounts showed that 66 entities having commonalities with the DHFL promoters received a disbursement of Rs 29,100 crore against which Rs 29,849 crore remained unpaid.

“Most of the transactions of these entities and individuals were in the nature of investments in land and property,” the bank said.

He revealed that the DHFL in a number of cases disbursed funds within a month, misappropriated funds for investments in Shetty entities, loans were rolled over without NPA classification, repayments of worth of hundreds of crores could not be found in bank statements and an unjustified moratorium on principal and interest was given.

Another large outstanding in the DHFL accounts was Rs 11,909 crore resulting from loans and advances worth Rs 24,595 crore granted to 65 entities between April 1, 2015 and December 31, 2018.

The DHFL and its promoters also disbursed Rs 14,000 crore as project finance but reflected the same as retail loans in their books.

“This led to the creation of a bloated retail loan portfolio of 1,81,664 fake and non-existent retail loans totaling Rs 14,095 crore outstanding.

Loans referred to as “Bandra Books” were kept in a separate database and later merged with other Major Project Loans (OLPLs).

“It was revealed that the OLPL category was largely carved out of the aforementioned non-existent retail loans amounting to Rs 14,000 crore, of which Rs 11,000 crore was transferred to OLPL loans and Rs 3,018 crore was retained as part of the retail portfolio as unsecured retail loans, he alleged.

DHFL, its directors and executives have continued to claim that they are trying to de-stress the business through various means such as securitization of a housing loan pool, project loans, divesting developers’ stake in the company, they said.

Kapil Wadhawan continued to argue that DHFL has six months of cash and would still have excess cash even after taking into account all repayment obligations, the bank claimed.

After “falsely assuring” lenders, the DHFL delayed interest payment obligations on term loans in May 2019, which subsequently continued with an account reported as non-performing assets, they said.

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