|Manmohan Singh, India's prime minister, has not been accused of benefitting from any alleged corruption [Reuters]
Eight senior officials from banks and financial firms in India have been arrested 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 (CBI) on Wednesday said those arrested included the chief executive of LIC Housing Finance and senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India.
The accused received bribes valued at hundreds of millions of dollars from private finance firm Money Matters Financial Services, which acted as a "mediator and facilitator" of corporate loans and other facilities, the CBI said.
The CBI declined to disclose details on the size of the loans, but they would have been significantly larger than the alleged bribes.
'A lot of bad news'
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 investigated for possible involvement.
"The markets have been struggling to digest a lot of bad news in the last few days and this scandal adds to the headwinds. Investors will certainly react nervously," Jagannadham Thunuguntla, the equity head at SMC Capital, said.
"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 properly to avoid these cases."
Corruption has long been a major problem in India, which is 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 amid allegations that his ministry sold mobile photoe licenses at reduced rates to underserving applicants.
Raja's resignation rocked the coalition supporting India's ruling Congress party, and has resulted in a supreme court order, requiring Manmohan Singh, India's prime minister, to explain why it took a year to address parliamentary demands that Raja be investigates.
The country's attorney general defended Singh before the court on Tuesday, saying that "all efforts" had been made to "deal with the complaint."
Before the telecom scandal hit, the Commonwealth Games were also riddled with corruption allegations. Suresh Kalmadi, the head of the organising committee, was forced to resign from his position in the Congress party.
India was ranked 87th in Transparency International's 2010 ranking of nations based on the perceived level of corruption.