Assures swift action in Yes Bank IPO allotment

Taking cognisance of Securities Exchange Board of India's (Sebi) reference to alleged irregularities in allocation of Yes Bank's initial public offer (IPO), Reserve Bank of India (RBI) Governor Y V Reddy said that the central bank would take prompt action.

Sebi on Thursday had referred Bharat Overseas Bank and Vijaya Bank to the RBI for their roles in opening bank accounts of certain entities and funding of their IPO applications.

"We have imposed heavy penalties on banks that have not complied with know your customer (KYC) norms in the recent past and we will promptly take action this time (also)," Reddy said on the sidelines of an Indian Banks' Association (IBA) seminar on corporate governance.

"Information given by Sebi will be useful to bring the culprits to book. RBI keeps a constant watch on the developments and will do whatever required," Reddy added.

Sebi has unearthed a dematerialisation account racket, where entities opened thousands of demat accounts and applied for the Yes Bank public issue through multiple applications for getting higher allotments in the retail portion of the offering.

In the past the central bank has come down heavily on banks flouting KYC norms. Just last year, it slapped a Rs 5 lakh fine (the maximum) on Citibank for non-compliance with KYC norms.

The penalty was imposed on the bank as it allowed the prime accused in the fake stamp paper scam, Abdul Karim Telgi and his associates, to open accounts with the bank.

This was the first instance that the central bank invoked provisions under the Reserve Bank of India Act, 1934, to impose the maximum fine of Rs 5 lakh on a bank for violation of KYC norms.