By Jessica Kuruthukulangara
BENGALURU (Reuters) - Shares of ICICI Bank, India's third-largest lender, slumped 7 percent to a five-month low on Monday after reports of authorities probing its lending practices.
ICICI Bank's shares ended 5.9 percent lower at 261.85 rupees, recovering slightly after falling to 258.80 rupees, their lowest since late October.
Police launched a preliminary inquiry about two months ago into Deepak Kochhar, the husband of ICICI Bank's chief executive Chanda Kochhar, Reuters and other media reported on Saturday.
The probe also involves unnamed ICICI officials and Videocon Industries, a consumer electronics and oil and gas exploration company, sources told Reuters.
Responding to a separate media report on the Enforcement Directorate, an agency fighting financial crimes, ICICI Bank said in a filing to exchanges https://www.bseindia.com/xml-data/corpfiling/AttachLive/396F92FA_1100_436B_98F9_4BF13AB9E8FB_144154.pdf on Monday that it had not received any communication from the agency.
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Last week, the bank described rumours circulating online alluding to conflicts of interest in ICICI's lending to Videocon, alleging that CEO Kochhar favoured the conglomerate, as "malicious and unfounded".
In a statement, the bank's board had said "there is no question of any quid pro quo/nepotism/conflict of interest" in its lending decisions, and expressed confidence in the CEO.
Videocon Industries closed down 5 percent at 12.40 rupees, its lowest in over four months.
Separately, ICICI's board of directors met on Monday, but the lender said that the meeting was scheduled to review cases https://www.bseindia.com/xml-data/corpfiling/AttachLive/babb73a6-9bfc-4c7c-a25a-dbcea35796d5.pdf filed before the National Company Law Tribunal for insolvency proceedings.
India's banking sector is on edge after state-run Punjab National Bank said in February that it had unearthed a roughly $2 billion fraud. The case has stunned financial markets and led to heightened levels of shareholder concern around any wrongdoing at Indian banks.
Sentiment was also negative after the central bank fined ICICI 589 million rupees ($9.1 million) for not sticking to rules around the sale of government securities.
"While this fine will not have a material impact on earnings, it is negative on sentiment because other banks seem to have interpreted the rules correctly," said IDFC Securities in a research note to clients.
($1 = 65.1100 Indian rupees)
(Reporting by Jessica Kuruthukulangara in Bengaluru; Writing by Euan Rocha; Editing by Stephen Coates and Muralikumar Anantharaman)