Companies cooking books to procure higher loans: Taxman to RBI

Income tax authorities have raised the red flag over banks allegedly approving loans to corporates based on inflated turnovers at a high-profile meeting of regulators and enforcement agencies, two individuals familiar with the development told ET NOW.

“The investigative wing of the income tax department has urged the RBI to look into this disturbing trend and consider guidelines for increased checks and balances at a recent meeting of the REIC”, said one of the two individuals cited above.

REIC’s or regional economic intelligence committees fall under the Finance Ministry and have been constituted for co-ordinating work amongst various enforcement and investigative agencies dealing with economic offences at a regional level.

“Bogus billing is a rampant practice aimed at inflated turnovers and the income tax department claims that some banks are approving loans to companies based on inflated turnovers, without verifying the sudden spike in revenues. The tax department claims banks are not raising an alarm in the absence of defaults by the companies”, added an individual privy to the discussions.

The income tax department’s concerns were fuelled after it detected alleged bogus billing by companies during recent raids in the real estate and textile sectors, sources added.