Y V Reddy, Governor of Reserve Bank of India (RBI), today said itwas not systemic failure but inadequate checks and balances in banks that lead to the IPO scam."It was the failure of checks and balances. Not a systemic failure," Reddy said.He said RBI will look into internal systems of banks, and check whether it has been fine-tuned or not.Earlier this month, Sebi had unearthed a scam in the IDFC IPO involving 45,000 fictitious demat accounts.Consequently, Sebi had brought the registrar and lead managers of the issue under its scanner, and asked the banking regulator to check the veracity of accounts in banks.RBI yesterday imposed penalties on seven commercial banks for breach of prudent banking practices and facilitating misuse of IPO finance to ineligible borrowers.On the modus operandi, he said the procedure adopted was delivering money to a person other than account payees. "The procedure was for convenience, but the banks misused it," Reddy said."In future, account payee cheques have to go to the account payee," he added.
