The Indiabulls Finance Centre, developed by Indiabulls Real Estate Ltd., in Lower Parel, Mumbai | Dhiraj Singh | Bloomberg
The Indiabulls Finance Centre, developed by Indiabulls Real Estate Ltd., in Lower Parel, Mumbai | Dhiraj Singh | Bloomberg
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Mumbai: Delhi High Court and the police force are poised to begin separate investigations to examine allegations of fraud and misappropriation against Indiabulls Housing Finance Ltd. and Lakshmi Vilas Bank Ltd., two lenders that have sought approval to combine.

The Court on Friday agreed to hear a petition that alleges Indiabulls gave loans worth billions of rupees to shell companies. The Delhi Police’s Economic Offences Wing registered a complaint against the board of Lakshmi Vilas Bank alleging cheating and misappropriation. The lenders are awaiting a nod on their merger deal from the country’s central bank, which has stepped up scrutiny of the proposal.

The merger is crucial for shadow lender Indiabulls, which is seeking to diversify its asset base, while the bank needs to raise capital to meet regulatory norms. Rating companies Crisil Ltd., Care Ratings and ICRA Ltd. have cut Indiabulls long-term ratings in recent weeks as a yearlong cash crunch weighs on its asset quality and raises borrowing costs.


Also read: How a law firm’s apology for ‘false cases’ turned around Indiabulls fortunes in a day


Indiabulls denied the allegations in the court and said that the loans mentioned in the petition were secured and most of them have been repaid. Registration of police complaint against Lakshmi Vilas Bank “does not mean anything, at this stage,” the bank said in an exchange filing, adding that the company is committed to cooperate with the investigating agencies and regulatory authorities.

Shares of Lakshmi Vilas Bank fell 5% in Mumbai on Friday, the most in three weeks, while those of Indiabulls Housing dropped 5.7%. Indiabulls’s $350m 6.375% notes due 2022 fell 0.7 cents on the dollar to 86.4 cents as of 6:28 p.m. in Hong Kong, according to prices compiled by Bloomberg.- Bloomeberg 

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3 COMMENTS

  1. Don’t quite understand why NBFCs are tagged “shadow lenders”? it sounds quite pejorative. NBFCs perform an absolutely essential function in the financial system by enabling intermediation and inclusion n areas where banks cannot or will not go. in fact, the issue with auto sales today is the problem of availability of credit – 80% of vehicle sales were funded by loans and a significant portion by NBFCs. Now that NBFCs do not have funds, they cannot lend and hence the lack of sales in the sector. Of course there are bad apples, but then you also have them among banks. NBFCs such as Chola or Sundaram (I don’t have shares in either, nor do I work for them) are possibly way safer and have better lending practices (as evidenced by NPAs) than most banks in the system. I would have expected Print, under the iconic Shekhar Gupta to not be so quick to use such hashtag worthy terms.

    • Agree with you completely. Calling HFCs and NBFCs shadow lender is like calling The Print shadow media because it is on a digital platform and not on paper.

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