Cobrapost fallout: RBI penalises Axis, HDFC, ICICI banks for rule violations

Moneylife Digital Team 10 June 2013

The penalty follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these three banks at their corporate offices and some branches during March/April 2013

The Reserve Bank of India (RBI) today imposed a fine of Rs5 crore on Axis Bank, Rs4.5

crore on HDFC Bank and Rs1 crore on ICICI Bank for violation of know your customer (KYC) norms and anti-money laundering guidelines after inquiring into charges levelled by a online portal Cobrapost.

“After considering the facts of each case ... Reserve Bank came to conclusion that some of the violations were substantiated and warranted imposition of monetary penalty...” the central bank said in a statement.

The scrutiny was conducted to investigate into the allegations of contravention of KYC/anti-money laundering guidelines against them following expose by online portal Cobrapost.

Although the investigation did not reveal any prima facie evidence of money laundering, RBI said, “Any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies.”

RBI further said that a similar scrutiny was being conducted at corporate offices of 36 other banks and “the process of follow up action in respect of these banks is at different stages of its completion.”

Based on the findings of the scrutiny, the RBI had issued show-cause notices to each of these banks, in response to which the individual banks submitted written replies.

The penalty, it said, was imposed after considering the facts of each case and individual bank's reply, as also, personal submissions, information submitted and documents furnished.

The scrutiny of these three banks, RBI said revealed violation of certain regulations and instructions issued by the central bank from time to time.

The violations include non-observance of certain safeguards in respect of arrangement of “at par” payment of cheques drawn by cooperative banks, non-adherence to certain aspects of KYC and AML guidelines like risk categorisation and periodical review of risk profiling of account holders.

They did not adhere to the KYC norms for walk in customers for sale of third party products and failed to file cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs50,000.

In certain cases, the banks failed to obtain permanent account number (PAN) card details or form 60/61 and verify the source of funds credited to a few non-resident ordinary (NRO) accounts.

RBI had launched the investigation into the working of banks following the expose by Cobrapost which showed some bankers giving suggestions to customers on ways to bypass regulatory norms.

The first expose had named ICICI Bank, Axis Bank and HDFC Bank. Later scores of other public and private sector banks and insurance companies figured in the expose.

Comments

User

arun adalja

1 decade ago

very low penalty considering their mistakes for violating norms prescribed by rbi.these banks must be banned opening new acounts and they must publish apology in all leading newspapers.