| NEW DELHI/MUMBAI
NEW DELHI/MUMBAI Aug 4 India's federal police
agency said on Monday it could widen its corruption
investigation after the arrest of Sudhir Kumar Jain, chairman of
state-run Syndicate Bank Ltd over allegations he was
seeking bribes to favour debtors.
The Central Bureau of Investigation (CBI) said on Saturday
it recovered 5 million rupees ($82,100) that a New Delhi-based
company was allegedly paying via middlemen to the bank's head
for a loan extension.
CBI spokeswoman Kanchan Prasad on Monday named the company
as Bhushan Steel Ltd and said middlemen paid bribe
money to Jain's relatives to win loan extensions after
defaulting on repayment.
Bhushan Steel denied any wrongdoing and said it was in the
process of taking appropriate "legal recourse".
"Please note that our company is not involved in any manner
with regard to the alleged payments and the same are denied and
hence in our opinion would not have any material impact," the
company said in a stock exchange filing.
Prasad said the investigation could be widened to look at
possible links between executives of other companies and
state-run lenders. "If required, the angle of the probe can be
widened," she said.
"This is an anti-corruption investigation and not a bank
fraud case we are looking at," she added.
A court in New Delhi on Sunday granted four days of police
custody for Jain, Prasad said.
His arrest is likely to renew demands for reform of Indian
state banks, which control about two-thirds of banking assets
and accounts for three-quarters of the sector's bad loans.
A committee appointed by the central bank in May termed
corruption in state banks a major "public policy concern", and
recommended the federal government cut its stake in these banks
to below 50 percent.
The CBI spokeswoman said eight other people, including two
directors of Prakash Industries Ltd - a company with
interests in steel, power and mining - and middlemen, had been
arrested over bribery allegations.
Prakash Industries could not be reached for comment.
The Finance Ministry placed Jain under suspension, effective
last Saturday, Syndicate Bank said on Monday. The bank has taken
steps for the smooth-running of its operations, it said in a
separate statement, without giving details.
Syndicate Bank ranks 13th among India's more than
three-dozen listed lenders with assets of nearly $42 billion,
according to Thomson Reuters data.
The lender last week reported a 7 percent increase in
quarterly net profit and higher bad loans.
Shares in Syndicate Bank closed 6.9 percent lower, after
falling as much as 8.5 percent during trade on Monday. Prakash
Industries slumped by their maximum daily limit of 20 percent,
while Bhushan Steel closed 3.6 percent lower.
(Additional reporting by Krishna Das in New Delhi; Editing by
Sumeet Chatterjee and Janet Lawrence)