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Eight executives arrested in latest Indian financial scandal

By Harmeet Shah Singh, CNN
  • Pervasive corruption "tarnishes our image to an important extent," says prime minister
  • Latest scandal involves alleged bribes for loans
  • Audit shows government sold airwaves at under value
  • Audit follows massive fraud in sports and real-estate
  • India

New Delhi, India (CNN) -- Indian federal police have arrested eight financial executives suspected of facilitating loans in exchange for bribes, the latest in a string of corruption scandals jolting Asia's third-largest economy.

R.K. Gaur, spokesman for the Central Bureau of Investigation (CBI), said a special court had ordered all eight men in police custody held for questioning. Five of the suspects belonged to state-run lenders and the remaining were part of a private financial firm, he said.

The CBI has also issued notices to 21 companies in connection with its probe into the bribes-for-loans case, Gaur added.

Meanwhile, India's Finance Minister Pranab Mukherjee has asked banks, financial and insurance institutions to evaluate their exposure to the firms named by federal investigators in their submission to the court. "He directed that they should carry out an independent evaluation on the asset quality, documentation and compliance of other prudential requirements in the companies mentioned in the CBI application (to the court)," a statement from the Finance Ministry said Thursday, a day after the arrests.

In its second term, Prime Minister Manmohan Singh's coalition government is facing massive criticism for handling endemic corruption.

Opposition parties have stepped up their attacks on Singh, hailed as father of India's economic reforms, since the country's main auditor reported this month that a sale of second-generation wireless spectrum two years ago had been carried out at below-market prices.

According to the government audit, the treasury lost up to $31 billion from under-valuation of airwaves.

The alleged scam, seen as the biggest to hit India in recent times, has forced the country's Telecom Minister A. Raja, to step down. Raja, member of a key regional ally of Singh's Congress party, denies the charges.

But opposition lawmakers are seeking a larger probe into the 2008 phone-license awards and accuse Singh of having not acted swiftly.

India's prime minister, on his part, insists the wrongdoers will be punished.

The damning audit report came on the heels of allegations of massive fraud in sports and real-estate.

Investigators are already probing complaints of financial malfeasance in the Commonwealth Games that India hosted in October.

Several politicians, military officials and bureaucrats are the subjects of a separate inquiry for allegedly taking flats meant for war-widows.

In April, the phenomenal Indian Premier League cricket tournament plunged into a crisis following accusations of money laundering and betting.

In its wake, the cricket scandal claimed the scalp of a federal minister.

Then junior foreign minister Shashi Tharoor resigned his post after allegations surfaced he had used his position to secure a stake for a female friend in a $333-million bid for a new team.

Tharoor denied wrongdoing, saying he was only a "mentor" to the consortium that had bought the new club in an auction earlier.

Corruption, Indian planners agree, pervades the country, from individuals to the high-echelons of power.

"There is a constant refrain in public discourse that much of what the government provides never reaches the intended beneficiaries -- whether it is subsidized food grains for the poor, loans, fertilizers or seeds on concessional terms for small and marginal farmers or the benefit of employment programs for the under-employed and unemployed," Prime Minister Singh told anti-graft officials last year.

The world, he noted, respects India for its democracy, independent judiciary and free press. "But pervasive corruption in our country tarnishes our image to an important extent," he acknowledged.

Nonetheless, India's media, judiciary and anti-corruption police often play a major role in dealing with the malaise.

Television stations prominently run stories on irregularities unearthed at top political and business levels, while courts take a stringent view of such cases.

Decision-makers recognize the problem as a test for a country emerging rapidly on the global stage.

"...India is on the move. The rise of India is the rise of a nation of over a billion people fighting poverty, ignorance and disease, battling social prejudices, living with inadequate infrastructure, dealing with corruption and misgovernance. It is one of the great adventures of our times," Singh remarked at conference last weekend.