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RBI intensifies scrutiny of Indiabulls Housing Finance, Lakshmi Vilas Bank

The central bank has also asked both the companies not to exchange information

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Reserve Bank of India has stepped up its "fit and proper" checks on the managements of Indiabulls Housing Finance and Lakshmi Vilas Bank following a public interest litigation (PIL) alleging wrongdoings at the housing finance company and the exit of the bank's chief executive officer.

The central bank has also asked both the companies not to exchange information and has stopped the interaction between the two managements, according to sources. Indiabulls Housing Finance and Lakshmi Vilas Bank are proposed to be merged and have received the go-ahead from Competition Commission of India.

The public interest litigation was filed by an NGO Citizens Whistle Blower Forum that alleged that the Indiabulls promoters were extending dubious loans to firms owned by large corporate groups.

UNDER SCANNER

  • RBI has also stopped the interaction between the managements of Indiabulls Housing and Lakshmi Vilas Bank
     
  • The heightened scrutiny by RBI is because a PIL has sought to make regulators party to its litigation

According to sources, the heightened scrutiny by RBI is because the PIL has sought to make regulators Securities and Exchange Board of India, Reserve Bank of India, National Housing Board and Ministry of Corporate Affairs as well as Serious Fraud Investigation Office party to its litigation. The next date of hearing in HC is 27 September.

On contacted, India Housing Finance said, "We haven't received any adverse remarks from NHB or RBI in the above matter'

Asked about the restriction issued to Indiabulls Housing Finance and Lakshmi Vilas Bank management, the company said, "No such restrictions have been issued in the context of the proposed deal."

On the completion of the merger, Indiabulls said, "We are unable to comment on the timelines involved in the regulatory process. However, the PIL doesn't have any bearing on the merger process, as all charges made in the PIL are absolutely baseless, false and mischievous."

In a BSE filing on September 6, Indiabulls had said it has come to its notice through media reports that a PIL has been filed against Indiabulls Housing Finance and its promoters in Delhi High Court.

The purported PIL admits that the allegations are the same as in the petition of earlier petitioner Abhay Yadav which was subsequently withdrawn, it said.

It said that for the past three months, the company is already undergoing various inspections and scrutiny of all the different regulators as a part of the merger process. "The company is determined to fight out the petitioners in the court," it added.

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