UPDATE 3-Guards beat customers at crisis-hit Afghan bank

* Angry customers demand their money

* Run on funds ahead of three-day holiday

* Central bank orders all but one Kabulbank branch to close (Adds Kabulbank spokesman, paragraphs 9-10)

KABUL, Sept 8 (Reuters) - Afghan security forces used batons on unruly customers scrambling to withdraw their savings on Wednesday from a branch of the graft-hit Kabulbank, the country’s biggest private financial institution.

Kabulbank’s troubles have threatened to add a financial crisis to Afghanistan’s other woes, with military and civilian casualties at record levels as a Taliban-led insurgency grows and ahead of parliamentary elections on Sept. 18.

Officers from the National Security Directorate struggled to maintain control of up to 200 people outside one branch in the capital as desperate customers tried to take out money ahead of a three-day Muslim holiday.

The crisis developed after the company’s top two directors resigned amid unproven media allegations of corruption.

Corruption is a common complaint among ordinary Afghans and Washington fears graft is boosting the insurgency and complicating efforts to strengthen government control so foreign troops can hand over to Afghan security forces -- whose salaries are paid through Kabulbank. [ID:nSGE67T05T]

The central bank on Monday ordered the assets of Kabulbank’s former chairman Sher Khan Farnood and chief executive officer Khalilullah Fruzi to be frozen, together with those of several other shareholders and major borrowers, pending an inquiry.

Reuters witnesses saw armed officers of the National Security Directorate beat several people -- including at least one policeman -- among queues of angry customers gathered outside the only bank branch to open on Wednesday. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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“It’s Eid, we need money for food, clothes, candy,” said Hameed Iqbal, an airforce member. “They said all the bank branches would be open, they lied. I’m extremely angry.”

A Kabulbank spokesman said the decision to close all other branches had been taken by the central bank.

The Afghan government and the central bank say the ailing Kabulbank has not been taken over, despite a central bank official being appointed as chief executive officer.

Afghan President Hamid Karzai’s spokesman promised the bank’s customers their savings were safe and told them to be calm.

“We guarantee their money and the central bank is ready to pay loans to Kabulbank whenever it is needed,” Siamak Herawi said.


Another customer, who identified himself as Rahim, blamed the government for the crisis at the bank.

“If they do not listen to us we will break all the windows of Kabulbank, we will loot all the branches and even ... the presidential palace,” said Rahim, who said he was a cook in a government office.

Widespread perceptions among Afghans that corruption is rife in Karzai’s government will be a major issue at a Sept. 18 parliamentary election, which is seen as a litmus test of stability in Afghanistan.

Kabulbank’s customers include 250,000 state employees.

Sayed Hammad, a 38-year-old grocery store owner, said he had heard on television on Tuesday that all Kabulbank branches would be open instead of just the single branch in Kabul. He said he wanted to withdraw $3,000 and close his account.

“I used to trust the bank but not anymore,” Hammad said. “You put your money in, you don’t know if you’ll get it out.”

Last week, U.S. media reported the central bank had taken control of Kabulbank, forcing Farnood and Fruzi to resign and ordering the chairman to hand over $160 million worth of luxury villas that may have been bought with bank funds in Dubai. [ID:nSGE6870DX]

The Afghan government and the central bank governor have both rejected the allegations, denying that the central bank had stepped in and saying Farnood and Fruzi had stepped aside in line with new financial regulations. (Additional reporting by Jonathon Burch; Editing by Paul Tait and Sugita Katyal) (For more Reuters coverage of Afghanistan and Pakistan, see: here) (; + 9370599 8317) (If you have a query or comment about this story, send an e-mail to