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29 March 2024

India hit by another major corruption scandal

Published
By Reuters

India's reputation as  a place to do business took another hit after the  scandal-tainted government charged top public sector bankers  of accepting bribes worth hundreds of millions of dollars. 

The federal Central Bureau of Investigation (CBI) on  Wednedsay arrested five officials from state-run listed  companies, including the chief executive of LIC Housing  Finance , for taking bribes to facilitate large  corporate loans.  

Three senior executives from a listed private company were  also arrested on charges of handing out the bribes.

The banking scandal is one of the biggest to taint India,  potentially harming the image of Asia's third-largest economy  as destination for foreign investors, especially as it comes a  few days after Prime Minister Manmohan Singh has had to defend  his government in another graft scandal involving telecoms  licenses sold at rock-bottom prices. 

"The message is not good, both for the market also for the  economy," said D.H. Pai Panandiker, head of private think tank  RPG Foundation. 

"All these things create a very bad image about the  country and it's kind of loss of faith in the system," he said. 

The scandals are unlikely to deter investors from India,  one of the four key BRIC emerging markets in the world and a  hot investment destination, analysts say. 

Investors are keen to tap into a country with a population  of 1.2 billion. Economic growth is forecast at 8.5 percent in  2010-11, and then between 9 and 10 percent every year after  that, levels rivalled only by China. 

India was ranked 87th in Transparency International's 2010  ranking of nations based on the perceived level of corruption.  India lies behind rival China, which is in 78th place.  

Shares in companies affected fell sharply since the  scandal broke, underperforming the Mumbai stock index . 

"The gratifications are huge, more than thousands of  crores (hundreds of millions of dollars)," CBI Joint Director  P. Kandaswamy told reporters on Wednesday. 

The Delhi government, however, sought to play down the  scandal, saying it was an isolated incident. 

"It is an insignificant amount... it is individual  personal greed, it is not systematic failure," R. Gopalan,  secretary for financial services told NDTV broadcaster late on  Wednesday. 

Officials contacted by Reuters, and who asked to remain  anoymous, said the government was not planning a special  meetings to discuss the bribery case and would leave it to the  CBI to handle. 

The CBI said those arrested included senior officials at  state-run Central Bank of India , Punjab National Bank   and Bank of India -- all major banks with  operations across the country. 

The executives in custody, and their institutions, have  yet to comment on the charges. 

Life Insurance Corp of India (LIC), the parent company of  LIC Housing Finance, was the only firm involved in the scandal  to speak out, saying it was looking into the need to tighten  internal operational systems, its chairman told CNBC TV18 on  Thursday. 


INDIA REELS FROM MORE SCANDALS 

The CBI said the accused had received bribes from listed  private broker Money Matters Financial Services,  which acted as a "mediator and facilitator" of corporate loans  and other facilities. 

The federal investigator declined to disclose details  about the size of the loans, but they would have been  significantly larger than the alleged bribes. Apart for Money  Matters, the CBI did not disclose the names of the other  companies that allegedly gave bribes. 

This is the third big Indian corruption scandal in the  past few months. 

India's government has been jolted by controversy over  licences and radio airwaves that a state auditor says were  given out too cheaply, depriving the government of up to $39  billion in revenues.   

The telecoms minister was forced to resign and the prime   minister has been asked to explain himself to the Supreme   Court. Opposition parties want a full parliamentary probe and   have blocked proceedings until the government relents. 

Before that, the Commonwealth Games (CWG) that India had  hosted were also riddled with corruption allegations. 

The government has resisted additional probes into the  telecoms scandal, saying a CBI investigation is under way.  Critics say the government fears it will be dragged into a  long-running investigation ahead of state elections. 

The houses of parliament were again adjourned on Thursday.  That has weakened the government's ability to move key  economic measures and delayed legislation, although the  government is not at risk of collapsing.