Stumbling upon a scandal: An LIC Housing Finance case probe led CBI to Syndicate Bank's Sudhir Kumar Jain

Luck favours the persistent could be the takeaway for the CBI in the bribery scandal involving Syndicate Bank Chairman and Managing Director (CMD) Sudhir Kumar Jain. Jain's arrest for allegedly favouring two companies-Bhushan Steel and Prakash Industries-and enhancing their credit limits in violation of rules is the outcome of the agency's probe into the 2010 LIC Housing Finance (LICHF) loan-for bribe scandal.

The tip-off in that case came from Pawan Bansal, the MD of financial services firm Altius Finserv. Bansal is alleged to be a middleman in that case and his information led to the arrest of senior LICHF officials. Over time though, CBI found that one of its joint directors (JD) was hand in glove with Bansal and began tracking them. While the JD was transferred to his parent cadre with a strong warning, investigators allegedly found that Bansal was a conduit trying to fix a deal for Bhushan and Prakash with a nationalised bank.

Investigators put Jain's phone under surveillance and allegedly found that he was in constant touch with Bansal. Jain was also allegedly instructing a junior to raise the credit limits of the two companies for a bribe of Rs 50 lakh.

But Jain's lawyer Varun Tankha says the CBI does not have anything incriminating against his client. "If someone is talking to someone, it does not mean you are a criminal. They will have to explain what these conversations pertain to," he says. CBI sources say the case has once again brought focus on the role of middlemen who operate as debt planners or financial advisers and connect borrowers and lenders.

"Senior officials at PSU banks often get away by arguing that bad loans are the result of a business decision gone wrong or by blaming it on recession," alleges a senior officer in the CBI's Economic Offences Wing. "Malpractices in the appointment of CMDs of banks is also responsible for this."

This claim is said to be substantiated in a letter from CBI chief Ranjit Sinha to Finance Minister Arun Jaitley, highlighting the events leading to Jain's appointment. Investigators are said to have found that Jain was given 62 marks out of 70 in his annual confidential report and 29 marks out of 30 in the selection board interview. Following the letter, Jaitley asked the RBI governor and cabinet secretary to take a fresh look at all such appointments over the last two years.

The CBI could also question previous RBI governor D. Subbarao and former revenue secretary Rajiv Takru, who were part of the board that interviewed Jain. But Takru says the CBI and the Central Vigilance Commission (CVC) were also involved in the process as they had given clearance to the appointment. "The selection committee was headed by D. Subbarao and not me. It consisted of five people including a director of IIM and a retired CMD of a public sector bank. The merit list was sent to the CBI and CVC for vigilance clearance," says Takru.

This case could well make more demands on the CBI's persistence.

- By Rahul Tripathi

- Follow the writer on Twitter @rahultripathi