India is investigating a multimillion-dollar bribery case involving its banking sector, the latest in a string of corruption scandals that has rocked the country in recent weeks.
Indian officials say several leading public sector banks and financial institutions are being scrutinized over allegations that senior officials received hundreds of millions of dollars as bribes to facilitate large loans to private companies.
Twenty-one companies, including several from the real estate sector, are being probed for possible links to the scandal.
Eight people were arrested Wednesday in connection with the case. They include five senior officials of some of India's top banks, such as Punjab National Bank and the housing loan firm of the country's largest insurer, Life Insurance Corporation of India. Three senior executives from a private sector company were arrested on charges of handing out the bribes.
Domestic media reports say some of these loans were invested in the stock market and not used for the purpose for which they had been raised.
The government is trying to contain damage to the image of India's banking sector. Officials say the alleged bribe-taking is a case of individual greed and not a systemic failure.
The governor of the Central Bank, Duwuri Subbarao, said authorities are constantly working on tightening regulations.
"Certainly there needs to be greater transparency in loan disbursement, there needs to be greater accountability in the loans disbursement system," said Subbarao.
The chairman of India's Planning Commission, Montek Singh Ahluwalia, played down the alleged bribes involving public sector banks.
"I don't think the scale of what we are talking about should be lost sight of," he said. "It is very small as far as the banking system as a whole is concerned."
India's financial system had withstood the global financial slump better than many of its counterparts in Western countries.
However, confidence in the banking sector has been hit. India's main stock index, the Sensex, has recorded significant losses in the wake of the banking graft scandal. Shares in the two sectors implicated so far in the probe, banking and real estate companies, have fallen the most.
The banking scandal erupted at a time when the government is under pressure to crackdown on corruption among its own officials. The biggest involves the alleged sale of telecom licenses by the telecommunications ministry in 2008 at cheap rates costing the country about $40 billion.