By Randeep Ramesh in Delhi

GUARDIAN NEWS SERVICE: Two firms banned from dealing with World Bank. Satyam changes management after scandal

The Indian corporate governance crisis deepened on Monday when it emerged that outsourcing group Wipro has been barred from dealing with the World Bank for four years.

The Bangalore-based group, which is India's third biggest outsourcing provider, said it was banned last year for offering shares to World Bank employees when it floated stock in the US in 2000.

Another Indian IT firm, Megasoft Consultants, was also barred after it had participated in a joint venture with World Bank employees while conducting business with the institution. Its shares fell 15% yesterday, while Wipro fell about 12% on the Mumbai stock exchange.

Wipro issued a statement denying any wrongdoing over the 2000 flotation. "Wipro has done no wrong. We offered three employees shares at the market rate," said Wipro's chief financial officer, Suresh Senapaty.

As part of the company's initial public offering of US-listed shares in 2000, Wipro offered stock to employees and clients, including to senior staff of the World Bank, who then made this offer available to family and friends, it said in the statement. They bought $72,000 of shares, but all participants had signed statements that they were not violating ethics or conflict of interest policies, said Wipro.

It is the latest blow for the prestigious Indian IT sector, which has been rocked by the scandal at Satyam, whose founder is now in jail after confessing last week to a GBP1bn fraud involving the falsification of asset values. Satyam has already been barred by the World Bank.

On Monday Satyam promised to bring in new auditors and a new layer of top management with government backing. The trio of government-appointed troubleshooters, headed by Deepak Parekh, a well known chartered accountant, said it was imperative to restore credibility.

Parekh said Satyam would move to retain clients, assess the extent of the fraud and appoint new managers.

"This is a 20-year-old company with a client list that reads like a Who's Who of global corporations," said Parekh. "We need to appoint a chief executive and a chief finance officer. We do not see a liquidity problem as far as loans are concerned. But let us confirm the veracity of the accounts."

The company's shares jumped yesterday to end the day more than 40% up at 34.40 rupees. Dealers said investors had been buoyed by news that the board would be expanded in the "next few days" by a new chairman, chief executive and finance officer.

Questions remain over the role of PricewaterhouseCoopers. Angry shareholders want to know why it did not seek certificates from banks attesting to the existence of money in Satyam's accounts. Officials have seized documents and the country's accounting body is examining local membership.