LIC Housing Finance Crashes with PSU Bank Stocks on Loan Scam in a Satyam Deja Vu

LIC Housing Finance is one of India’s Largest Home Lenders with a huge distribution network around the country.LIC Housing Finance Stock has been on a roll propelled by fast growth of the company and the housing loan growth sector.The Company was a relatively safe investment being promoted by Life Insurance Corporation (LIC) which is India’s largest insurance company owned fully by the government.The Foreign Ownership of the LIC Housing Finance Shareholding is quite high at 40%+ due to its relative safety and high growth.However the Central Bureau of Investigations (CBI) raids on the company has resulted in a sharp 20% price fall.The company’s top officials have been implicated in misappropriation of money and home loan scams along with a company called Money Matters.

The LIC Housing Finance Scam comes in the wake of numerous corruption scams breaking out around the country.India’s top corporate houses have not escaped with Videocon Industries,Unitech and Reliance Communication stock all falling in the aftermath of the 2G Telecom Auction Scam.Soros Backed SKS Microfinance has already fallen around 50% from its peak due to rise regulatory risks.Now the Finance Sector has also joined the corruption party underlining the hazardous nature of investing in Indian Stock Markets.Note Institutional Investors in India have overlooked the risks as they follow the herd instinct.The Satyam Scam which broke out 2 years ago revealed the impunity with which the business elite could trample over Indian laws in a blatant manner.

Housing scam: CBI arrests top officials of PSU banks, financial institutions – ET

The Central Bureau of India (CBI) on Wednesday arrested top officials from some leading PSU banks and public/private financial institutions. The CBI said that the officers of Bank of India, Central bank of India, Punjab National bank and LIC HF were receiving illegal gratification for facilitating loans. Executives at Money Matters were arrested for broking bribery deals . Five separate cases have been registered and investigations are on, the leading investigation agency said in a press conference. It hasn’t put up a figure to the size of the scam.

The biggest arrests included the CEO of LIC Housing Finance. The CMD of Money Matters Rajesh Sharma was also arrested. Executives from PNB, Central Bank of India, Bank of India were arrested in these raids. Among other arrests were two executives at Money Matters.

Earlier in the day, shares of LIC Housing Finance plunged 18.32 per cent to Rs 1068.55 on the BSE. It touched a low of Rs 1031.10 in trade. Shares of Central Bank of India also tanked on the same issue. The scrip fell 8.02 per cent to Rs 197.90 on the BSE. It touched a low of Rs 191.40 in trade.