India's embattled IT sector was dealt a further blow yesterday as Wipro, the country's third-largest outsourcer, admitted that it had been blacklisted from working for the World Bank for “improper” practices.

Shares in Wipro, which employs more than 95,000 people, closed nearly 10 per cent lower in Mumbai after the World Bank said that the group had been debarred from working with the institution for “providing improper benefits to bank staff”. The sanction was imposed in June 2007 and will run until 2011.

A Wipro spokesman said that the allegation related to a scheme that had allowed the company's clients to buy American depository receipts in the outsourcer when it listed in New York in 2000. Wipro had hoped that the scheme would burnish its brand; instead, it led to allegations of conflicts of interest when World Bank staff bought shares worth a total of $72,000 at the initial public offering price.

The blacklisting recalled that of Satyam, which was debarred by the World Bank for eight years in September after it emerged that the company had given a bank employee stock options. The incident was made public only on December 23, after the sanction had been reported in the media and Satyam had demanded an apology from the bank, suggesting that the reports were untrue.

Wipro said that its revenue from the World Bank was insignificant and the ban would not adversely affect its business.

News of its blacklisting came as global confidence in India's regulatory regime plummets. The World Bank said that it had also banned Megasoft Consultants, another Indian software company, for four years from December 2007 for “participating in a joint venture with bank staff while also conducting business with the bank”.

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