Money & Banking

CBI books Wadhawans of DHFL in biggest-ever bank fraud of ₹34,614 crore

BL New Delhi Bureau | | Updated on: Jun 22, 2022

The agency carried out searches at 12 places in Mumbai after registering the FIR, which does not name bank officials

The CBI has booked Kapil Wadhawan and Dheeraj Rajesh Kumar Wadhawan of DHFL for cheating a consortium of 17 banks to the tune of ₹34,614 crore. The agency carried out searches on Wednesday at 12 locations in Mumbai to unearth evidence against the accused in the biggest-ever bank fraud.

The CBI has registered its FIR on the basis of a complaint filed by Union Bank of India (UBI) on February 11. UBI was leading the consortium of 17 banks, formed in July 2010, to lend staggered loans of ₹42,871.42 crore to DHFL. Of the 12 accused, including the two Wadhawans and Sudhakar Reddy, nine are construction companies. Though the sleuths have not named any bank officials in the 33-page FIR, officials said a clean chit could be given to them only after the probe is complete.

The Mumbai-based DHFL, established to enable homes for low- and middle-income individuals in semi-urban and rural areas, defaulted on loans borrowed from the consortium banks, which forced them to declare its accounts as NPAs on different dates, said the CBI. The CBI stated that the management committee of the consortium banks located at cities that include in Delhi, Mumbai, Ahemdabad, Kolkotta, Pune, Chennai, Hyderabad and Bangalore, granted loans on different occasions.

Data compiled by the CBI in its FIR show that State Bank of India was the worst hit, having an NPA of ₹9,898 crore, which is exactly the amount DHFL borrowed from it. Similarly, Bank of India and Canara Bank have been looted to the tune of more than ₹4,000 crore each by DHFL. And more than ₹3,000 crore each has been allegedly wiped off by the DHFL from Union Bank of India and Punjab National Bank.

Of the 17, only four private banks — such as HDFC, Federal Bank, Karnataka Bank and South Indian Bank — were taken for a ride by the DHFL, though the amounts defaulted are comparatively less. While HDFC lost ₹349 crore out of the ₹350 crore sanctioned, Federal Bank lost ₹202 crore (from the ₹300 crore released), Karnataka Bank's loss was ₹185 crore (₹200 crore sanctioned) and South Indian Bank's NPA was the lowest at ₹71.86 crore (₹332 crore sanctioned), according to the figures compiled by the CBI.

The CBI also stated that UBI, e-Andhra Bank and e-Corporation Bank also subscribed to non-convertible debentures of the DHFL from 2016 to 2018. The three NCDs issued were subscribed by the bank, including one of ₹250 crore, which was redeemable at the end of three years with an annual coupon of 8.90 per cent. But the company defaulted on its entire loan repayment obligations to the banks from May 2019 itself, and the NCDs were also not redeemed, said the CBI.

Well before DHFL started failing to pay back loans, a number of NBFCs faced problems in raising funds due to IL&FS not honouring its commitments. This led to a sharp correction in the share price of DHFL, alarming consortium banks, which raised queries on the fiscal health of the firm, said the CBI. However, DHFL’s directors and officers claimed the fall in share price was on account of sale of commercial papers by one of its investors, the CBI stated. Since January 2019, media reports blew the whistle on fraud by DHFL promoters/directors through diversion, round tripping and siphoning of funds.

The consortium banks held a meeting on February 1, 2019, to take congnisance of the serious allegations, and a core committee of seven largest banks — SBI, BoB, BOI, Canara Bank, CBI, SB and UBI — was formed. Agencies were also appointed for monitoring of cash flows, and KPMG was roped as auditors to conduct a special review audit of DHFL for the period between May 1, 2015, and March 31, 2019.

According to the CBI, DHFL’s Kapil Wadhawan falsely assured lenders that adequate steps were being taken to de-stress the company and maintained that they had adequate liquidity. It was done to delay on its interest payment obligations towards term loans and NCDs for May 2019, which eventually led the account to be declared NPA. Due to DHFL accounts being declared Red Flagged Account (RFA) on October 1, 2019, a Look Out Circular (LOC) was issued on October 18 that year against the Wadhawans.

The Reserve Bank of India appointed RS Subramania Kumar as administrator to control DHFL and reported to NCLT, Mumbai, for proceedings under for insolvency proceedings under Insolvency and Bankruptcy Code of 2016. The corporate insolvency resolution was approved by the NCLT, allowing DHFL take over by the Piramal Group. Due to this, the consortium banks could recover funds of ₹5,977 crore and fresh NCDs of ₹7,186 crore.

KPMG’s audit report, available with the CBI, highlights that 66 entities and individuals were given various loans to the tune of ₹29,100 core, and of that, ₹29,849 crore remains outstanding. Kapil Wadhawan was in control of 40 entities and appointed its directors and auditors and handled their I-T notices and their other internal matters, which indicated round-tripping of the funds.

The CBI has come across ‘Bandra Books’, which were maintained by former Special VP Special projects DHFL, Jayesh Khona, and assisted by Sangeeta Amin and Priya Naik. In a separate accounting software, dummy names of non-existing retail laons were recorded. Khona and his team used to pass fake accounting entry to falsely reflect servicing of interests on the fake retail loans by by passing debt and credit entries of same amounts, the CBI alleged in its FIR.

Published on June 22, 2022
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