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The finance ministry on Thursday assured action against the three private banks which were alleged by online portal Cobrapost for violating know your customer and anti-money laundering norms. Following the allegations, the Reserve Bank of India (RBI) investigated the issue and shared the report with the finance ministry.
Rajiv Takru, financial services secretary, who met RBI officials on Thursday, said, “The report has come and you’d see some action.” “Whatever responsibilities would have to be fixed will be fixed and whatever rectifications have to be done would be done,” he added.
He, however, said no timeline had been fixed for taking action. Takru told reporters, “There is no tearing hurry to run into some kind of hasty decision-making and in the process do something foolish.” He said, “Banks would be asked for their version based on the audit reports and then we would decide what needs to be done.”
Several banking regulation issues were discussed. Last month, Cobrapost, in a sting operation, had shown employees of three private banks — ICICI, HDFC and Axis offering to convert clients’ black money into white. Following the exposé, all three banks, as well as RBI and the Insurance Regulatory and Development Authority (Irda) had constituted enquiry committees into the matter. RBI’s committee has already given its report. The central bank is yet to make it public. Irda had instituted an inquiry as an offer was allegedly made to convert black money into white through insurance policies, amongst others. The Irda panel is yet to give the report.
Takru, however, said there was no risk of systemic failure. He said, “There are certain aberrations which have been discovered.” He said, “These will be addressed, both in systemic factors and individual cases.” He added, “All concerned will be given a complete opportunity to explain and what is correct and appropriate would be done.”
CAG audit
The Comptroller and Auditor General (CAG) had recently pointed to loopholes by banks in the agriculture debt waiver scheme announced by the government in 2008. Based on that, the finance ministry and CAG had asked banks to take corrective actions.
Commenting on it, Takru said the matter was being addressed by banks and the finance ministry was receiving information every month. He said “Recoveries have started and in a month or two, the matter will be resolved.”
NPA and restructuring
With most pubic sector banks seeing a rise in non-performing assets, the finance ministry has asked the lenders to initiate action so that asset quality can be improved. Banks have requested the central bank not to implement the higher provisioning requirement on standard restructured advances with immediate effect. He said, “We have told banks they must reduce their gross non performing assets in the environment that exists. I do not want to confuse and dilute the whole thing by saying RBI should change the norms and so the banks have been told to pull up their socks within the existing framework and that is what these are required to do.”
