Live Mint 11 Aug 14
Shares of IDBI Bank Ltd fell as much as 5.5% after the Central Bureau of Investigation (CBI) registered a preliminary enquiry against the state-owned lender and grounded airline Kingfisher Airlines Ltd, with the intention to look into the bank’s decision to sanction Rs.950 crore to the airline at a time when it had a negative net worth and negative credit rating.
Shares of Kingfisher Airlines fell over 5%.
The enquiry comes a week after CBI arrested S.K. Jain, chairman and managing director of Syndicate Bank Ltd for allegedly taking a bribe of Rs.50 lakh for increasing the credit limit of two companies in violation of banking rules. It also arrested Ved Prakash Agarwal, chairman and managing director of Prakash Industries Ltd, which has interests in mining and steel, and Neeraj Singal, vice-chairman of Bhushan Steel Ltd, in the bribery case.
The shares of Bhushan Steel Ltd fell 10% to Rs.197.45. The stock has fallen 50% in the last one week, while Syndicate Bank stock fell 10.58% during the same period.
Recent moves by the CBI against IDBI Bank and the chairman of Syndicate Bank are likely signs of the government getting tough on bad loans in the banking system—as much a reflection of the rot in Indian banking as it is of the economic slowdown and policy paralysis that delayed projects, Mint reported on Monday.
There could be more such action by enforcement and investigative agencies and the banks could get more aggressive in dealing with the sour loans on their books, the Mint report added.
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