RBI deputy governor cautions banks on bad elements

Says a great deal of effort and alertness required to curb nefarious activities including terror funding

Reserve Bank of India (RBI) deputy governor R Gandhi on Friday said a great deal of effort and alertness was required on part of banks against bad elements using the banking channels for their nefarious activities, including terrorism.

Delivering a lecture on KYC (know your customer) norms in terms of compliance and convenience at a meeting organised by the Federation of Andhra Pradesh Chambers of Commerce (Fapcci) and Industry here today, Gandhi said the liability side of the banking transactions such as deposits and accounts had started assuming high importance as the issues of illegal money and terrorism financing became matters of serious concern.

After international focus was drawn on to KYC practices, the RBI moved away from document-based identification and also shifted focus to non-compliance by banks, he said.

The banking regulator recently instructed all the banks to issue unique identity cards to all their customers for monitoring financial transactions in a holistic manner thereby enabling banks to have a better approach to risk profiling of customers among other things, according to him.

Responding to a question on the limitations of banks in terms of taking exposure to risk, the deputy governor said they had to be conservative when it comes to their exposure to the three sensitive sectors, namely real estate, stock and bullion markets for the safety of the customers’ deposits.