The scandal surrounding payment by Bank Bali to recover a loan has prompted strong words from the International Monetary Fund which has told the government to conduct a thorough investigation.

"Nothing that has occurred in recent days has in any way detracted from Standard Chartered's commitment to invest in and develop the `new' Bank Bali," Douglas Beckett, Bank Bali management team head and Standard Chartered representative, told reporters.

The controversy is over a 546 billion ($71 million) payment by Bank Bali to a company controlled by a senior official of the ruling Golkar party to help recover 904 billion owed by the government's banking overseer, the Indonesian Bank Restructuring Agency (IBRA).

The size of the payment and the use of a middleman has come under heavy attack. The episode has dented confidence in Financial markets, helping drive down stocks and the rupiah.

And it has prompted Golkar's rebellious deputy chairman, Marzuki Darusman, to warn the party may dump Habibie as its candidate for the November presidential election if the affair is not resolved quickly and cleanly.

Darusman and other Golkar officials say the affair has damaged the party, even although it has done nothing wrong.

Golkar lost a June 7 parliamentary election to populist opposition leader Megawati Sukarnoputri and is now scrambling to win enough support for Habibie to retain the presidency in November.

Standard Chartered last month took over management control of Bank Bali after it agreed to pay part of the 4.3 trillion rupiah cost of recapitalising the debt-laden bank, which has 280 branches around the country.

StanChart is paying $56 million for what will be 20 per cent of Bank Bali after recapitalisation via a rights issue.

Beckett said about half, or 287 billion rupiah, of the loan recovery fee had been repaid by Wednesday. But the Golkar official at the centre of the row, Setya Novanto, said all the money was paid back on Monday.

Various Indonesian agencies, including IBRA and the central bank, are investigating the payment and an independent foreign auditor has also been called in.

The International Monetary Fund, overseeing Indonesia's economic reforms in return for leading a $45 billion international bail-out, has demanded a thorough public investigation, followed by legal action if required.

Reviving the battered banking sector, weighed down by negative margins and billions of dollars in bad debts, is seen as vital to dragging the country out of its worst economic crisis in three decades.

The banking industry was symbolic of the corruption that infected Indonesian business under former president Suharto and any sign of backsliding in cleaning up the sector sends jitters through the markets, already unsettled by political uncertainty.

The Jakarta stock market suspended trading in Bank Bali shares on August 12.