India's J&K Bank shares slide further on fraud probe allegations (updated)

Jammu And Kashmir Bank

11/06/2019 17:12

(Adds income tax department's raid on a customer of the bank)
    MUMBAI, June 11 (Reuters) - Shares in India's Jammu and
Kashmir Bank Ltd  JKBK.NS  slumped for a second consecutive day
on Tuesday, after local media reported that an anti-corruption
probe had uncovered a sizable fraud at the state-run lender.
    Shares in the bank closed down 6.72% at 48.55 rupees after
falling 12.4% on Monday, despite the bank stating late on Monday
that "there would be no adverse financial implications" from the
investigation.  urn:newsml:reuters.com:*:nBSE1tvZyG 
    The bank confirmed late on Monday that its headquarters had
been raided by the anti-corruption bureau (ACB) of the state of
Jammu and Kashmir, after some complaints of alleged malpractices
and governance issues within the bank.
    Citing unnamed government sources, the Economic Times
reported on Tuesday https://economictimes.indiatimes.com/industry/banking/finance/banking/crackdown-against-corruption-cbi-ed-may-be-roped-in-to-probe-jk-bank-case/articleshow/69733214.cms
 that the ACB's investigations had uncovered the likely
diversion of loans worth 10 billion rupees ($144 million),
without giving more details. 
    Jammu and Kashmir Bank did not immediately respond to
requests for comment on the matter.
    Elsewhere, a government statement said India's income tax
department had initiated search and seizure operations on
Tuesday at a Sringar-based business that had received a 1.7
billion rupee ($24.49 million) loan from Jammu and Kashmir Bank.
    The business, which deals in silk yarn, had later
restructured the loan for a 770 million rupee "one time
settlement", of which it has paid only 503 million rupees, the
statement said.
    The settlement of the loan was a result of an "active
connivance" of a senior official of the Jammu and Kashmir, the
statement added. 
    The bank could not immediately be contacted for comment. 
    In a surprise move, Jammu and Kashmir Bank on Saturday said
that the state government had ousted Parvez Ahmed as its
chairman and managing director and appointed R.K. Chhibber, a
senior bank official, as interim chairman and managing director.
    In a statement to the stock exchange on Monday morning, the
bank said its board at a meeting on Saturday had recommended
splitting the roles of chairman and managing director to improve
transparency.
    In a tweet following his ouster, Ahmed said "Absolutely no
regrets. Did my job most diligently, honestly and in the best
interest of the institution. Open to scrutiny on each and every
transaction I have done during my two decades of functioning in
the bank."
    India's banks have come under increased scrutiny since
state-run Punjab National Bank  PNBK.NS  reported a massive $2
billion fraud last year, raising questions around the auditing
and regulatory oversight of the country's banks.
($1 = 69.42 rupees)

 (Reporting by Swati Bhat; Additional reporting by Aftab Ahmed
and Mayank Bhardwaj in NEW DELHI; Editing by Susan Fenton and
Jan Harvey)
 ((swati.bhat@thomsonreuters.com; twitter.com/swatibhat22;
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swati.bhat.thomsonreuters.com@reuters.net))