UPDATE 2-Top India banks, fin firm execs held on bribery charges
* LIC Housing Finance CEO, execs at state-run banks arrested
* Five cases registered, investigation in progress - CBI
* Charges include taking bribes for giving corporate loans (Recasts, adds byline, more quotes)
By Kaustubh Kulkarni and Sowmya Kamath
MUMBAI, Nov 24 (Reuters) - Eight top officials from Indian banks and financial firms were arrested on Wednesday on charges of taking bribes to grant corporate loans, dealing another blow to Indian markets hit by a multi-billion dollar telecoms scam.
The Central Bureau of Investigation said it had arrested officials including the chief executive of LIC Housing Finance (LICH.BO) and senior officials at state-run Central Bank of India (CBI.BO), Punjab National Bank (PNBK.BO) and Bank of India (BOI.BO).
The accused received bribes from a private finance services company, Money Matters Financial Services MONE.BO, which acted as a "mediator and facilitator" of corporate loans and other facilities, the Central Bureau of Investigation (CBI) said. "The markets have been struggling to digest lot of bad news in the last few days and this scandal adds to the headwinds. Investors will certainly react nervously to the findings," said Jagannadham Thunuguntla, equity head at SMC Capital. Corruption has long been a major problem in Asia's third-largest economy. The CBI revelations come on the heels of a telecoms scandal that has forced India's telecoms minister to resign and has paralysed the country's Parliament.
"I don't think there is any dearth of regulatory norms in the country, lack of implementation of the regulations leads to these kind of financial crimes," Thunuguntla said. "We need to ensure the regulations are implemented property to avoid these cases." The federal investigative agency did not provide financial details of the charges, but analysts said huge sums of money could be involved and many corporate houses could also be probed for their possible involvement in the case.
"Offices of top management and middle management of various public sector banks and financial institutions...were receiving illegal gratification," P. Kandaswamy, a joint director at the CBI, told reporters. Officials at Central Bank of India, Money Matters, Punjab National Bank, Bank of India and Life Insurance Corp of India, the parent of LIC Housing Finance, could not be reached for comment.
On Wednesday, shares in LIC Housing Finance closed down 18 percent, Central Bank fell 8 percent, Punjab National Bank dropped 3 percent, and Bank of India slipped 6 percent on reports of the charges. Money Matters plunged 20 percent. And analysts said there could be more hammering of the stocks on Thursday, as jittery investors worry about the financial impact of the scandal on the companies.
"Very clearly, as names come out, it will impact stocks. Individual stocks will be impacted instead of across the market," Arun Kejriwal, strategist at research firm KRIS in Mumbai said.
The CBI has registered five separate cases on charges of corruption in the ongoing investigation, Kandaswamy said.
This is the third big Indian corruption scandal in the past few months. Before the telecom scandal hit, the Commonwealth Games were also riddled with corruption allegations. The head of the organising committee has since been forced to resign.
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. ($1=45.7 rupees) (Additional reporting by Tanmaya Nanda; Writing by Sumeet Chatterjee; Editing by Jui Chakravorty)