By Hamid Shalizi

KABUL (Reuters) - An Afghan court handed down jail time on Tuesday to 16 of 22 men accused of involvement in a multi-million dollar bank fraud in sentences that will likely be seen as an affirmation of Afghanistan's commitment to fighting corruption.

The collapse of Kabulbank in 2010 triggered a financial crisis, civil disorder and a run on deposits, worrying foreign donors and embarrassing the U.S. and Afghan governments, which had touted its credentials as a modern lender integral to developing a tiny economy crippled by war and mismanagement.

The two former chiefs of the bank, founder Sher Khan Fernod and former Chief Executive Haji Khalil Ferozi, accused of taking $810 million of the $935 million steal, were both given five-year sentences.

The case's outcome was seen as a crucial barometer of Afghanistan's commitment to stabilizing the economy, less than two years away from the withdrawal of most foreign troops and a possible winding down of billions of dollars in foreign aid.

Brothers of President Hamid Karzai and his first vice-president, Mohammad Qasim Fahim, who were both shareholders, were spared jail sentences in the rulings thanks to a presidential decree a year ago that granted immunity from prosecution to those who returned funds.

"Ferozi and Fernod have been sentenced for five years each in jail for the theft of Kabulbank assets valued at $531 million and $279 million dollars respectively," said Judge Shamsul Rahman Shams, who heads a special court set up for the Kabulbank investigation.

The government bailed out the country's then biggest after it collapsed and relaunched it as the state-run New Kabul Bank.

In addition to jail time, both Ferozi and Fernod are required by law to return the money to the government, said the tough-talking Shams, who previously made it clear that no-one - regardless of political or business connections - would be spared in the investigation.

Those sentenced have the right to appeal against Tuesday's rulings.

Last year, Karzai's brother, Mahmoud, said he had paid back $22 million and the vice-president's brother, Haji Hasseen, allegedly returned $18 million. Both had denied wrongdoing.

Of the 14 other men sentenced on Tuesday, four are Indian nationals and the rest are Afghan, Shams said.

Contrary to popular assumption that most of the money ended up in Dubai, as little as 10 percent was smuggled overseas and channeled into luxury villas.

The rest was invested in Afghanistan, from an oil storage facility, a television station and a gas firm to property developments, some of which the government had agreed to purchase.

(Writing by Amie Ferris-Rotman; Editing by Robert Birsel)