* LIC Housing Finance CEO, execs at state-run banks
* 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 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
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)
"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
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
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
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.
(Additional reporting by Tanmaya Nanda; Writing by Sumeet
Chatterjee; Editing by Jui Chakravorty)