DHFL Scam: India's Biggest Banking Scam

The Dewan Housing Finance Corporation Limited (DHFL) scam has sent shockwaves through India's financial sector, once a leading housing finance company in India, it became embroiled in a massive financial scandal in 2019 and marked one of the most significant banking frauds in the country's history.  

This scam came to light when a series of irregularities in the company's financial transactions and operations were uncovered. It was revealed that DHFL had allegedly siphoned off funds through fictitious shell companies, inflated turnover, and fraudulent inter-company deposits. The scam, which is estimated to be worth thousands of crores, has had far-reaching implications for the credibility of India's banking and financial system.

Thousands of investors and lenders faced significant financial losses, which also points to concerns about the security of India's banking and financial institutions.

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The Allegations

The Central Bureau of Investigation (CBI) alleges that DHFL, under the leadership of the Wadhawan brothers, Kapil and Dheeraj, perpetrated a loan fraud of a staggering Rs 34,615 crore (US$4.6 billion). The accusations involve:

Diversion of Funds: DHFL allegedly sanctioned loans to shell companies, essentially fictitious entities, controlled by the Wadhawans. These funds were then diverted for personal gain.

Falsification of Accounts: The CBI claims DHFL inflated loan balances to create the illusion of financial health and secure additional loans from banks.

Default on Repayments: DHFL ultimately defaulted on these loans, causing significant losses to a consortium of 17 banks.

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Impact of the Scam: CBI Arrests Dheeraj Wadhawan

Dheeraj Wadhawan on Tuesday was arrested by the Central Bureau of Investigation (CBI) in the Rs 34,000 crore DHFL bank fraud probe, however, Wadhawan was already charge sheeted in 2022 in connection with the same.

CBI had apprehended Dheeraj Wadhawan, along with his brother Kapil Wadhawan and Ajay Nawandar, based on a complaint from the Union Bank of India, which led the 17-member lender consortium that provided credit facilities to DHFL. The CBI accused the Wadhawans and others of engaging in a criminal conspiracy, misrepresenting and concealing facts, committing a criminal breach of trust, and misusing public funds, resulting in the defrauding of the consortium of Rs 34,615 crore by defaulting on loan repayments from May 2019 onwards.

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