IPO-tainted banks face criminal action

The Reserve Bank of India (RBI) proposes to initiate criminal action against banks involved in the IPO scam. After its meeting with the standing parliamentary committee, the central bank has decided to open a fresh probe into banks' involvement in the IPO scam.

Based on the probe, the cases may be referred to the Central Bureau of Investigation (CBI). It has already referred the case of Bharat Overseas Bank to CBI for further probe, sources said.

In January 2006, RBI had penalised nine scheduled banks "" Bharat Overseas, Citibank, HDFC Bank, ICICI bank, Indian Overseas bank, Standard Chartered Bank, Vijaya Bank, IDBI Bank and ING Vysya Bank "" for violation of RBI instructions on extending finance to retail customers for participating in the initial public offers of various companies.

In the Bharat Overseas case, the RBI had found that IPO finance was extended to fictitious/ benami individuals and account payee cheques were collected from various individuals who were not customers of the banks.

Citibank, ICICI bank, HDFC Bank, Standard Chartered Bank, Vijaya Bank, ING Vysya and IDBI Bank were penalised for violating RBI norms on monitoring suspicious transactions, and adherence to know your customer norms.