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The Reserve Bank of India ruled out any systemic problem or scam in the recent expose made by onlione magazine Cobrapost.com through sting operations which alleged three private sector banks of violating money laundering and know your customer norms.
“Allegations doesn’t mean flouting (of KYC norms). There is not a single transaction which has taken place” K C Chakrabarty, deputy governor, RBI who is incharge of bank supervision department in central bank told reporters today.
“We cannot take action based on allegations, (only) if we find something ...that is a continuous process” Chakrabarty said adding supervisory process of RBI is very effective. If we find something is wrong, we will always take action he said.
Cobrapost.com has alleged that employees of some of the branches of ICICI Bank, HDFC Bank and Axis Bank were violating those norms. Following the expose, the banks had commisioned enquiry and had suspended the employees caught on hidden camera. RBi has also started probing the headquarter and the branches of these branches and have asked information from them.
Chief executives of all three private banks – alleged of money laundering refused to take questions on the same however Chanda Kochhar, chief executive and managing director of ICICI Bank said ICICI Bank expects the inquiry report by Deloitte by March 31.
Chakrabarty said the current guidelines are for avoiding money laundering are enough and there will be always some transactional issues when there are large number of happening daily. One can’t monitor all transactions he said.
“KYC violation will happen in any system. These are all transactional issues, it has nothing to do with money laundering” Chakrabarty said.
He however admitted that current allegations give RBI to have look at all the norms and procedures again and if there is need of further tightening of the norms RBI will certainly do it.
There would be always some black money in the system and we don’t require sting operation to show that Chakrabarty said.
Money laundering is not what is being alleged he said. In money laundering source of money is criminal activity and the money on which tax is not paid are two different things, he added.
Chakrabarty said the country's anti money laundering system is working perfectly while adding that it’s not a systemic issue.
On the likelihood of other irregularities like flouting of KYC norms and suspicious transactions, he said there are sufficient guidelines to prevent them and banks are following them.
"All our successive FSR (financial stability report) are highlighting that we have serious concern over bank branches selling gold coins, mutual fund products, insurance...it involves multiple regulators and it also involves KYC (Know Your Customer) requirements” added Chakrabarty.
We are going for a large scale financial inclusion drive, if we make KYC too stringent, then banks will not open the accounts," Chakrabarty said.
RBI top brass including governor D Subbarao today met CEOs of all banks in country to discuss direct benefit transfer and risk based supervision for the Indian banks.
While Subbarao discussed direct benefit transfer with bankers, Chakrabarty held discussions on risk based supervison.Nandan Nilekani, chairman, UIDAI also gave the presentation in the meeting, bankers said.
