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NAIROBI Oct 27 (Reuters) - The receiver for Kenya's privately owned Imperial Bank (IBL) found substantial fraud but the bank is still viable and shareholders are considering a proposal to inject capital, the central bank said on Tuesday.
Imperial Bank was put into receivership this month after the board alerted the central bank to malpractices at the mid-sized lender, rattling the financial community.
The central bank said it had received a report from the receiver, Kenya Deposit Insurance Corporation (KDIC), that "confirms fraudulent activities of substantial magnitude, and the misrepresentation" of Imperial Bank's financial statements.
"The fraudulent activities have resulted in a significant shortfall in IBL's capital position," the Central Bank of Kenya said in a statement, adding that it and the receiver still considered Imperial Bank to be "viable".
But the shareholders would have to inject new capital to meet the capital shortfall in order to reopen the bank, the central bank said.
"Shareholders requested to consider the proposal over the next few days and to come back with an implementation plan for the way forward," it said.
The fraudulent activities included "irregular loans" granted by the management, and in particular that this had violated the limit on lending to a single borrower, it added. (Writing by Edmund Blair, editing by David Evans and Adrian Croft)
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