Former senior officials at Canara Bank in India have become embroiled in allegations of fraud.
Regulatory officials have cracked down on shady loans in the country’s vast state banking sector after a huge $2-billion corporate fraud was uncovered at state-run Punjab National Bank (PNB) earlier this year.
As of last September, state banks held about 87% of the Indian banking system’s 9.46 trillion rupees (about $147 billion) of bad loans that are non-performing, restructured or rolled over, Reuters said.
Shares of the Bangalore-based bank tumbled more than 5% in early trading on Tuesday after a slew of former Canara officials were charged with helping a company defraud the bank.
The Central Bureau of Investigation (CBI) – the country’s top investigative agency – filed charges against several former managers of Canara Bank and executives of a Delhi-based private company for allegedly cheating the bank of Rs 683.6 million ($10.5 million), Mint reported.
Charges were filed against the bank’s former chairman and managing director, two former executive directors, a former deputy general manager and a general manager, as well as two directors of the private company. The agency first registered the case in January 2016.
The company got a loan through one of the bank’s branches in New Delhi, which was sanctioned in December 2013. The loan ended up becoming a non-performing asset (NPA) in September 2014.
The CBI alleged that funds were siphoned off through a chain of alleged bogus transactions facilitated by fake sister concerns, family members and bank officials including the top executives.
It also found that there was a nexus between the bank and company officials, which enabled the fraud to occur.