Shares of UCO Bank took a tumble on Thursday after news emerged that the Central Bureau of Investigation (CBI) had conducted raids at several of the bank's locations in connection with a suspected Rs 820 crore scam. This incident has cast a shadow over the bank, raising concerns among investors and stakeholders.

The Downward Spiral

The UCO Bank stock witnessed a significant intraday decline of 3.50%, hitting a low of Rs 56.50. Although the stock managed to partially recover, it still ended the day 1.66% lower at Rs 57.58. This sharp decline can be attributed directly to the news of the CBI raids.

CBI Investigation into Alleged IMPS Scam

The CBI's investigation revolves around a suspected scam involving unauthorized Immediate Payment System (IMPS) transactions. According to reports, over 8,53,049 IMPS transactions, valued at Rs 820 crore, were fraudulently credited to UCO Bank accounts between November 10th and 13th, 2023. These transactions originated from around 14,600 accounts held by individuals in seven private banks, but the funds were never debited from those accounts.

Second Round of Searches

This is not the first time the CBI has looked into this matter. In December 2023, the agency conducted searches at 13 locations, including residences of private individuals and UCO Bank officials in Kolkata and Mangalore. The recent raids mark an escalation in the investigation, indicating the seriousness with which the CBI is pursuing this case.

Market Reaction and Key Metrics

The news of the raids sent shockwaves through the market, leading to a surge in trading activity. Around 28.94 lakh shares were exchanged on the Bombay Stock Exchange (BSE) on Thursday, significantly higher than the two-week average volume of 20.99 lakh shares. The market capitalization of UCO Bank stood at Rs 68,842.41 crore at the close of trading.

In terms of technical indicators, the bank's 14-day Relative Strength Index (RSI) stood at 53.46, indicating neither overbought nor oversold territory. However, investors might be cautious given the ongoing investigation. Additionally, the company's stock has a price-to-equity (P/E) ratio of 40.96, which is relatively high compared to the industry average.

UCO Bank Yet to Respond

As of now, UCO Bank has not issued any official statement regarding the CBI raids or the alleged scam. The lack of communication from the bank has further contributed to the uncertainty surrounding the situation, potentially leading to continued volatility in its share price.

Looking Ahead: Uncertainty and Scrutiny

The CBI investigation into the alleged Rs 820 crore scam throws a cloud of uncertainty over UCO Bank. Investors are likely to remain cautious until the investigation reaches a conclusion and the bank sheds light on the matter. The outcome of the investigation will have a significant impact on the bank's reputation, share price, and future prospects.