Dai-Ichi Kangyo Bank officials wined and dined Finance Ministry officials while the bank was under a ministry investigation in 1994, and they are suspected of prodding the ministry into issuing a favorable report on its bad loans, sources said Wednesday.

The Tokyo District Public Prosecutor's Office said it is investigating details of the entertainment and the inspections. Dai-Ichi Kangyo is suspected of entertaining the inspectors in exchange for a favorable classification of its bad loans.

Loans by financial institutions are classified according to repayment prospects. Healthy loans are put in the first category; those in danger of becoming delinquent in the second; at serious risk of delinquency in the third; and unrecoverable loans are put fourth, they said.

Loans in the second and fourth categories are defined as bad loans. An increase in the number of unrecoverable loans will result in a downgrading of a bank's credit rating, affecting business performance, they said.

A special prosecuting team is to decide soon whether some current or former Finance Ministry officials who reportedly received extensive wining and dining could be indicted on bribery charges, the sources said. A ministry inspection of Dai-Ichi Kangyo in mid-October 1994 found that 8.8 billion yen extended to "sokaiya" corporate extortionist Ryuichi Koike, 54, were soured loans, the sources said.

Dai-Ichi Kangyo is also accused of failing to tell inspectors about 4.8 billion yen in loans purportedly provided to Koike's brother, thus evading inspection on the loans, they said. Consequently, the special squad indicted the bank on July 28 on charges of violating the Bank Law. It was ordered by the Tokyo Summary Court to pay a 500,000 yen fine.

The following day, the ministry admonished two officials in connection with wining and dining by Dai-Ichi Kangyo, the sources said.

The Finance Ministry lifted on Wednesday some of the sanctions it levied in July against Dai-Ichi Kangyo Bank for its involvement in a high-profile payoff scandal. Dai-Ichi Kangyo is once again allowed to extend fresh loans, with the exception of individual housing loans, and participate in auctions of bonds issued by the government and other public sectors.

The major commercial bank is weathering the scandal involving a "sokaiya" corporate extortionist, on the strength of an upturn in individual deposits, Dai-Ichi Kangyo officials said. The bank saw its individual deposits slip by 560 billion yen for a half-year period starting in mid-May, when the bank's illegal payments to extortionist Ryuichi Koike came to light, the officials said.

But its deposits posted a year-on-year rise in October, and they are believed to have improved by more than 500 billion yen in December alone due to success in convincing workers to deposit their bonuses at the bank, the officials said.