RBI to tweak KYC norms to tighten banking system, says Chakrabarty
To extend thematic review to 34 banks; rules out breach of anti- money laundering norms |
BS REPORTER
Mumbai, 23 April
The Reserve Bank of India ( RBI) has said it might tweak the knowyourcustomer ( KYC) norms in order to strengthen the banking system.
RBI has also decided to undertake a thematic review in 34 banks.
Speaking on the sidelines of the Sustainability Conference organised by YES Bank in Mumbai, RBI’s Deputy Governor K C Chakrabarty said that the regulatory issues around KYC and other business norms were being looked at and, if necessary, RBI will order corrective measures.
“At a transactional level, there are some aberrations which ( will) always take place and there is a need to look into those issues,” said Chakrabarty.
Last month, online portal Cobrapost had alleged that employees of ICICI Bank, HDFC Bank and Axis Bank were offering services to convert clients’ black money into white, without the knowledge of the regulator and other bodies.
Chakrabarty added RBI had found no evidence of money laundering, as alleged by Cobrapost. “ There is no evidence.
There was no transaction.” Chakrabarty also said the investigation report won’t be made public.
“RBI supervisory investigation is an issue between supervisor and supervised entity,” he said. “ That is not for public discussion”.
He reiterated the banking system in India was sound. Chakrabarty, however, admitted to aberrations in the system. He refused to answer the question ona monetary penalty for alleged violations by the three banks.
“If need be, monetary penalty would be imposed,” the deputy governor said.
During his speech at the conference, Chakrabarty said, “The problem is not that of technique or skill, it is a problem of attitude... It is a problem of the corporate philosophy, which needs to be changed and this has to be addressed at the board level, at the enterprise level.” He added banks, especially private ones, needed to aggressively go after education loans.
“Ninety- six per cent of education loans are given by public sector banks and banks need to finance aggressively for educating students to promote sustainability,” said Chakrabarty.
RBI is serious about social and environmental sustainability, Chakrabarty said, pointing to the priority sector guidelines.
“Even where we have given directions, the performance is abysmal, especially by the elite banks,” he added.
BS REPORTER
Kolkata, 23 April
HDFC Bank today said it was yet to find a transaction which had breached the country’s anti- money laundering rules.
The country’s second largest private sector lender is investigating allegations that it was one of three banks to be operating a money laundering racket. Cobrapost, an online magazine, had secretly taped as many as 25 employees seemingly offering money laundering as a product to undercover journalists.
While the bank is doing an internal audit in some of its branches, it has also appointed Deloitte Touche Tohmatsu India to conduct an independent enquiry. The Reserve Bank of India has also examined transactions in some of HDFC Bank’s branches.
“The issue is being reviewed and investigated from multiple quarters. Clearly, all the investigations have shown that there have been no instances of transactions actually taking place. Our belief is that the existing processes seem to have worked in not allowing these transactions to happen,” said Paresh Sukthankar, executive director of HDFC Bank.
He clarified the investigation process was not over, as the bank was examining “ lakhs of transactions” across 20- 25 branches in the past year. “ We want to be as thorough with our examinations as possible. We expect it to be over in the next few weeks,” he said.
The bank would strengthen its internal controls if it found any weaknesses. The 25 employees on videotape remain suspended.
Money laundering: HDFC Bank says probe into Cobrapost exposé yet to find irregularities
Reserve Bank of India Deputy Governor K C Chakrabarty
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against Saradha Group
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BS REPORTER
Mumbai, 23 April
The Securities and Exchange Board of India ( Sebi) has initiated aprobe into the activities of the beleaguered Saradha Group in West Bengal, which had collected crores of rupees promising higher- than- average returns before shutting down. Sebi will investigate whether Saradha’s fund- raising business was within the Collective Investment Scheme ( CIS) regulations, said a senior Sebi official.
“Sebi has already initiated an inquiry following certain complaints against Saradha Group. Since the matter is under investigation, we cannot comment any further,” said the official.
The capital market regulator’s probe comes in the wake of repayment defaults by Saradha Group, which resulted in a few deposit- holders and agents killing themselves.
The company’s weakening finances had forced it to shut down the newspapers and television channels, which it had either launched or acquired since 2010- 11.
According to reports, at least ₹ 20,000 crore of deposit holders’ money is at risk after the sudden closure.
Sebi has received complaints that Saradha had raised money without necessary approvals. While Sebi regulates CIS, chit funds come under state governments’ ambit.
A CIS is defined as any scheme or arrangement made or offered by any company under which the contributions or payments made by the investors are pooled and utilised with a view to receiving profits, income or property, and is managed on behalf of the investors.
Schemes including chit funds, Nidhi companies and schemes offered by co- operative societies do not constitute CIS.
Sebi has been seeking more powers to nail offenders who collect money without seeking approval. The regulator has sought amendment to the Sebi Act as it has faced difficulties while recovering money from illegal CIS.
Terming unauthorised CIS as the ‘grey market’ of the financial space, Sebi Chairman U K Sinha had recently said the rise in volumes in such activity was worrisome.
“The audacity and frequency with which it ( illegitimate money collection) is happening is worrying and something all of us must take note of,” he had said.
Sebi launches probe
SARADHA MESS
TSI P3 >
>West Bengal’s ‘ chit fund’- fuelled media boom MANOJIT SAHA & SOMASROY CHAKRABORTY
Mumbai/ Kolkata, 23 April
The West Bengal government seems to have ignored the alarm bells sounded by the central bank and other lenders in the state on the mushrooming of chit funds such as the underscanner Saradha group.
In the state level bankers’ committee (SLBC) meetings as early as in December last year, bankers raised the issue of these chit funds. The message was conveyed to the representative of the government, both verbally and formally.
According to bankers, there could be at least 80 such entities in the state, which are collecting deposits from the public. Saradha is in the news due to the scale of its operations and the resulting impact when it failed to repay its depositors following a run on it. The group’s chairman and managing director, Sudipta Sen, was on the run for days; he was nabbed today from Sonmarg in Jammu, with two other company officials. It has turned out to be the biggest crisis yet for the Mamata Banerjee government.
Turn to TSI, Page 2 > Bengal govt ignored RBI alert in Dec
Subbarao had even publicly said all states had been warned to act, that it was solely their responsibility THE STORY SO FAR
|Sebi has received complaints that Saradha had raised money without approvals |Sebi will investigate whether Saradha’s fund- raising business was within the CIS regulations |Sebi regulates CIS, while chit funds come under state governments’ ambit
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