IndiaAs more developments emerge on the biggest bank scam in Indian history, here’s a run-down into what happened.
The Dewan Housing Finance Corporation Ltd., or Piramal Capital and Housing Finance Limited as it is called now, is essentially a financial service company, whose primary function comprises issuing home loans to lower and middle-income Indian groups. DHFL is considered one of the earliest housing lenders in India and boasts a place among the country’s biggest financial companies.
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In 2022, the officials of the Union Bank of India filed a complaint against the Wadhawans and a few others, claiming that the group had conspired to cheat and forged books, among other serious allegations. In their FIR, the bank mentioned that the housing company had borrowed Rs 42,000 crores from a consortium of 17 banks (led by them), of which over Rs 34,000 crores still remained unpaid.
Eventually, auditing firm KPMG was appointed to perform a special audit of DHFL’s finances from 2016 to 2019, to assess if there had been any financial wrongdoing on the housing company’s part. What they found was shocking, to say the least.
The audit by KPMG alleged that DHFL had fraudulently lent over Rs 29,000 crores to 66 entities that had internal ties with the company’s promoters. These funds were given willy-nilly, with the borrowers — who were mainly DHFL promoters — receiving these loans without proper scrutiny or obtaining adequate securities.
Further, CBI’s probing revealed that the DHFL’s promoters had devised 87 shell companies — companies that exist only on paper and have no active business operations — to siphon money from these loans. These promoters transferred over Rs 11,000 crores of funding to these companies as and when required, which was primarily used for personal or business use. Kapil and Dheeraj themselves purchased 24 paintings worth 63 crores using these diverted funds, reports show.
It is important to note that most of these companies did not have any ongoing projects to justify these loans — criteria which are generally heavily scrutinised before the funds are received. “No formal process of loan appraisal or assessment, security, credit committee was followed in violations of applicable DHFL credit policies," as the Economic Times explains.
Perhaps one of the most cunning aspects of the scam was the fact that a fake “virtual branch” was added to DHFL’s software system to account for the diverted funds. This “Bandra Branch” did not have a physical office and was primarily used to feed money to these shell companies.
The CBI also explains that the Wadhawans had allegedly created lakhs of fake borrowers by randomly using information on existing home loan borrowers of DHFL. Not only were these accounts used to borrow loans aggregating upwards of Rs 14,000 crores, but they were then leveraged against the Pradhan Mantri Awas Yojana — a scheme to ensure housing for poorer sections — to help DHFL illegally avail Rs 1,880 crores in interest subsidy from the Government.
Dheeraj Wadhawan has been arrested by the CBI for his alleged involvement in defrauding a bank consortium of Rs 34,000 crore. He was remanded in judicial custody after being arrested from Mumbai. This follows the previous arrests of Dheeraj and his brother Kapil in July 2022.
The CBI has since filed a charge sheet against 75 entities, including the Wadhawan brothers. Despite earlier bail, the Supreme Court revoked it, citing legal errors. Dheeraj got interim bail for medical reasons but was arrested after it expired.
Currently, three individuals, including the Wadhawans, are in custody. The CBI has accused them of financial irregularities, diverting funds, and misusing public money.