DLF Gives Interest Free Loan to Robert Vadra -  Did Lender Banks Permitted This ? 

by

Rajesh Goyal   

At the outset I would like to clarify that usually AllBankingSolutions.com do not publish or write on issues which are purely of political in nature as this website is not meant for political discussions, and our focus is on banking industry.   There are number of news channels and websites which are exclusively for this purpose.   However, at times situations arise when we need to discuss also the topics which are mainly political in nature but also related to banking industry   Yesterday evening, Mr Arvind Kajeriwal exploded a political bomb accusing Robert Vadra (son in law of Ms Sonia Gandhi) for using DLF for monetary gains.   In the columns below, I will not be discussing the gains by Vadera, but will like to place before our readers some glaring issues relating to the transactions by DLF which have implications for the officers who have been involved in the process of sanction of loan to DLF.     In this context, the yesterday's development are important not only for CMDs, EDs of the lending banks, but also officers at lower level from Scale I to Scale VII. 

The news reports indicate that like  any other big real estate company, DLF too has taken loans from number of banks under consortium.   In yesterday's press conference, Mr Kejeriwal has pointed out that DLF  has given interest free loan of Rs 65 crores to company  with links to Vadra.     We do not have readily available the latest details of the amount of loan availed by DLF from PS Banks and the names of the banks which have given such loans.     However, this is immaterial as   the relevant question here is whether any listed company which has taken loan from banks can give interest free loan to anybody without the consent of the banks ?  

Whether in this case, top brass of Banks colluded with DLF to allow such interest free loans  ?  What was the role of Boards of the lending banks in these cases?    Did any bank noticed or raised this question at the time of sanction / renewal of the loans ?   Did the Boards of all the lending Banks were sleeping and kept on sanctioning / renewing limits without even noticing these facts ?   If this fact was noticed, by some banks, then what was the action taken by them?

With my limited knowledge of credit, the terms and conditions of the loans do not allow the companies to give loans (specially interest free loans) without the consent of the lending banks.   In recent years number of times banks have allowed various  concessions to real estate companies owing to so called financial crisis.   I am sure DLF must have availed a number of such concessions from banks.   The question arises, Are banks meant for charity only ?  At the time of raise in salaries of bank officers, lot of hue and cry is raised  in the name of squeezing profits,  but  when it is an issue of concessions to big corporate, concessions  are doled.   Now it is coming to light that such corporate are providing interest free loans to people associated with political class.    It is a matter of shame and investigation. 

Another issue is from the point of shareholders.  Shareholders of DLF  also have every right to question as to why interest free loans were granted at the expense of their hard earned money.   DLF officials will have to do lot of home work to justify their acts in this regard.

I would request our readers who have wide experience in credits to throw more light on this issue, as I may be having only limited knowledge.   This will help to  enlighten other readers about the rules and regulations in this regard as this issue will be of great importance in the days to come and some lower officials may even be charge sheeted.    The readers who are dealing with real estate accounts should revisit the balance sheets of their borrowers to check whether such irregularities are prevalent in other cases also.   If yes, either approval of the Board should be obtained in such cases or it should be form part of the sanction note as  in the political fight, many  lower level bankers may be trapped and targetted.  

Readers with deep credit knowledge are requested to share their knowledge and experience in this regard (there is no need to mention the name of bank or the name of the borrower as these are irrelevant for our discussion purpose here)  by giving comments below so that our banker friends  are enlightened and can save their skin in future.