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Updated: July 3, 2014 18:01 IST

Banking industry sees challenge in compensating investors

K. Manikandan
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A number of investors in Prime Sristi Housing Limited's multi-storey project had availed huge bank loans — Photo: K. Pichumani
The Hindu
A number of investors in Prime Sristi Housing Limited's multi-storey project had availed huge bank loans — Photo: K. Pichumani

The promoter of the collapsed multi-storey building is reported to have settled the huge loan he had obtained from a public sector bank to launch his project.

Meanwhile, there is still no clarity on the fate of loans obtained by the individual investors from different financial institutions.

According to government records, M. Manoharan, managing director of Prime Sristi Housing Limited, had obtained Rs. 6 crore from the public sector bank of which he was a former employee and also maintained an account with. The sources said this was the first time that the bank had extended such a huge loan to him for developing his business, and he had now repaid the entire amount.

“A number of investors have availed huge loans and this is the first time that we have experienced such a disaster, but we have to recover all outstanding loans as they are ‘public funds’, ” a senior official in the banking industry said.

The official added that it was just impossible for any bank, be it in the public or private sector, to go into any technical aspects, say, the construction quality or soil test, or make site visits. He said that for extending loans to the investors, they had relied on ‘no objection’ certificates and other documents issued by the government agencies, apart from plan sanctions from the Chennai Metropolitan Development Authority or other planning agencies and local bodies.

A young professional, who had invested in the property, said that for him and other investors, the priority was the rescue of the trapped victims, and the issue of compensation could be taken up later. Trade unionists in the banking industry too were of the view that as the collapse of the building was a ‘rarest of rare case,’ the question of compensating and repaying the investors had to be taken up by the finance ministry along with the State government, adding that the process would take a while.

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