ICICI Bank is accused of lending money for the purchase of some apartments in a housing project in a Mumbai suburb, and in some cases twice for the same set of apartments. According to the chartered accountant who spotted irregularities, the bank disbursed home loans for the purchase of 15 apartments in the Ritu Paradise Project developed by S R Developers in Mumbai's Mira Road. Documents available with ICAI and in SundayET's possession show that double loans were issued by the Bank on some flats.

These loans were part of the block of bad loans sold to ARCIL, which helps banks to free up capital by buying such loans and seeks to recover them. Although the loan amount for these 15 flats were only in the region of only Rs 2-3 crore, the accounting regulator is of the view that the bank bears responsibility for selling off these bad loans to ARCIL without verifying it.

A spokesman for ICICI Bank admitted that such an incident had taken place. "When this asset was sold to ARCIL, this was not identified as fraud. The builder fraudulently recreated the entire documentation and sought finance. Such frauds are a challenge to the industry," he said. On the issue of loans being issued twice for the same property, the ICICI spokesman said: "Since there is no central database, it is almost impossible to track whether any loan has already been given against a specific property."

But ICAI said this episode exposed holes in the bank's systems. "In four cases, double loans were issued by ICICI Bank itself. This shows the inability of the bank's IT set up and its due diligence mechanism," Mr Agarwal said.

RBI should appoint auditors

HE added that the appointment of auditors in private sector banks should also be done by RBI as in the case of public sector banks. "No autonomy should be given to the management of the private sector banks. In the past too, there were accounting issues and the recent example is the fall of Global Trust Bank", he said.