Top policy makers and bankers on Thursday sought to underplay the arrest of senior officials of some financial institutions and banks, saying they were but isolated cases of graft and not a major scam that can shake the system.
"I do not think we should make too much of a particular incident," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters in New Delhi. "Our banking system is well regulated. Both the finance ministry and the central bank will take appropriate action."
Banking Secretary R Gopalan held a similar view and said the amount involved in these graft cases was insignificant, looking at the financial sector as a whole. "It's a case of individual greed not a systemic failure," Gopalan said.
Their comments came a day after top officers of some state-run banks as also financial institutions were arrested by the premier federal probe agency for allegedly accepting bribes to extend loans to corporate houses in a housing finance scam.
The Central Bureau of Investigation (CBI) said that officials arrested included the chief executive of LIC Housing Finance, a general manager of the Central Bank of India and senior officials of Punjab National Bank and Bank of India.
Search and seizure operations were conducted in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar based on secret information received by the bureau. The alleged scam has been going on for some time, a spokesperson for the investigative agency said.
The agency also dispatched letters seeking explanation from at least 15 firms against which it claimed to have unearthed incriminating evidence. But officials at financial institutions said the development did not reflect any systemic failure.
"We are trying to have an internal enquiry into this matter. Our asset quality has not been impaired," said Life Insurance Corp of India Chairman T S Vijayan. "We will see if internal systems need tightening, whether risk management needs tightening."
But the stock markets were unrelenting.
The 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) fell 141.69 points, or 0.73%, Thursday, while the drop in the index for banking stocks was twice as much at 1.42%.
The shares of Bank of India fell 5.85% and those of Punjab National Bank dropped 6.38%. Officials of both these banks were among those who were taken into custody on Wednesday for questioning on the alleged draft cases.
The development had seen the shares of LIC Housing Finance dive 18.32% at Rs.1,068.55, while that of the Central Bank of India plummeted 8.02%. Bank of India's stock fell 5.88%.