Shares of the country’s third-largest lender closed at Rs 261.9, down Rs 16.5, or 5.93 per cent on the BSE, the most since August 24, 2015. The market valuation eroded by Rs 104.52 billion to Rs 1.68 trillion on the BSE. The fall came against the backdrop of the Central Bureau of Investigation (CBI) launching a preliminary enquiry into alleged links between ICICI Bank’s Chief Executive Officer Chanda Kochhar (pictured) and the Videocon group.

The ICICI Bank stock has fallen 15 per cent over the last three months, while the Axis Bank stock has taken a knock of 11 per cent in the same period.

According to reports, the CBI is verifying allegations of corruption and a possible nexus between Videocon group Chairman Venugopal Dhoot and Chanda Kochhar’s husband, Deepak Kochhar. Last week, ICICI Bank termed the reports of conflict of interest “malicious and unfounded” and denied Chanda Kochhar favouring the conglomerate.

In a statement, the bank’s board said “there is no question of any quid pro quo/nepotism/conflict of interest” in its lending decisions. The lender said no single executive had the ability to influence credit decisions at the bank. The bank’s board and chairman had also expressed confidence in the CEO.

Besides the CBI probe, the bank is also facing a penalty of Rs 589 million imposed by the Reserve Bank of India (RBI) for flouting rules over the sale of government securities. This is also weighing on investor sentiment.

“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.

ICICI Bank’s board met on Monday to review cases that are before the National Company Law Tribunal (NCLT) under Insolvency and Bankruptcy Code.

“It is important to note that the board has been meeting regularly in the first week of April in the previous years, too, to review progress in resolution of large cases,” the bank said in a notification on exchanges.

Following the meeting, the bank informed exchanges that its board gave its approval to redeem 350 unlisted redeemable preference shares, Rs 10 million each, due for redemption on April 20. The shares were issued on April 21, 1998 with a tenure of 20 years.

The board also approved reclassification of various instruments in the authorised share capital into one category named equity shares.

The shares of IDBI Bank also dropped 4 per cent on the BSE but recovered to end 1.6 per cent lower amid reports that the RBI had written to the finance ministry expressing concern over the bank’s poor financial health.

The banking sector has been under pressure since February after state-owned Punjab National Bank reported a Rs 129 billion fraud.

The recent events have made investors sceptical about the asset quality of banks, particularly those in the public sector.

The Nifty PSU Bank, a gauge for performance of state-owned bank stocks, was down 29 per cent from its peak in January.