CBI books DHFL's Wadhawans in Rs. 34000-crore bank fraud case
The Central Bureau of Investigation (CBI) has booked former promoters of Dewan Housing Finance Corporation Ltd (DHFL), Kapil Wadhawan and Dheeraj Wadhawan, among 13 accused in the biggest-ever bank fraud case in India. Wadhawans are accused of defrauding a consortium of 17 banks of over Rs. 34,000 crore. CBI is reportedly conducting searches at 11 locations across the country associated with the accused.
Why does this story matter?
- Until now, the Nirav Modi-led PNB loan fraud of Rs. 13,000 crore and ABG Shipyard loan fraud of Rs. 20,000 crore were considered to be the biggest bank-loan fraud case in the country.
- However, with Rs. 34,000 crore loan fraud, DHFL's case has become the biggest-ever loan fraud case in India.
- Notably, the loan was declared Non-performing Asset in 2019 and fraud in 2020.
Case was registered on the complaint of UBI
The case against Wadhawans and 13 other accused was registered by CBI on the basis of a complaint from Union Bank of India (UBI), which is the leading bank in the consortium. According to the UBI complaint, since 2010, the DHFL has extended credit facilities of over Rs. 42,000 crore by the consortium of which Rs. 34,615 crore remain outstanding.
Forensic audit indicates financial irregularities
A forensic audit conducted by the KPMG in 2020-21 of DHFL loan accounts observed, "large amounts were disbursed as loans and advances by the borrower company to a number of inter-connected entities and individuals with commonalities to DHFL Promoter Entities, which were used for purchase of shares/debentures." Most of the transactions of such entities/individuals were in the nature of investments in land/properties, it added.
How did the fraud happen?
According to KPMG reports, 66 entities related to the DHFL and the Wadhawans, were advanced loans to the tune of nearly Rs 30,000 crore by flouting all norms. Of these, Kapil Wadhawan alone allegedly controlled about 40 entities by way of appointing directors and auditors, handling income tax notices, maintaining secretarial records of these entities and managing overall control over finances of these companies.
DHFL defaulted its debt obligations from 2019 onwards
Reportedly, DHFL defaulted on its debt payment obligations from May 2019 onwards. This was followed by a sharp correction in DHFL's share price. When banks raised questions on the company's financial health, Wadhawans gave false assurance saying DHFL held a strong liquidity equated to six months of cash and would remain cash surplus even after considering all repayment obligations for the Financial Year 2018-19.