A sting operation conducted by online magazine Cobrapost across various branches of private banks has revealed how bank employees are accepting black money from customers to convert them into white money. Cobrapost Editor Anirudh Bahal has insisted that leading private banks like HDFC Bank, ICICI Bank and Axis Bank are involved in this. He joined IBNLive readers for an interaction on the issue.
Q. Private banks are more interested in unethical business than service and ethical way of earning profit? Is this the rule of the era. I think Indira Gandhi did a good work by nationalising major banks. Asked by: Sathyaki
A. Our investigation clearly shows that the legitimacy of the deposits of these banks is in question and therefore their profits. If banks are going to be flouting all manner of laws like the Income Tax Act, RBI regulations, the anti money laundering act, Banking Act, FEMA etc then it's a big disaster. Private banks were allowed into the banking space to serve a certain purpose. That is, to increase banking density etc. But if they are going to be eager to be complicit in turning black money white then their licenses need to be re-examined and any licenses that are to be issued to new entities needs to be put on hold till processes are in place.
Q. Are major private Indian banks involved in money laundering? Asked by: Mahender
A. That's what our Operation Red Spider was about. It exposed money laundering practices in HDFC Bank, ICICI bank and Axis Bank.
Q. Is one of the reasons for this the attitude of senior bankers to KYC and AML?. A few years back, I saw a Senior Banker on a channel saying KYC is Address Proof and ID Proof. Asked by: Narayan
A. Yes. The bank officials should be stringent in following Know Your Customer norms and should also ensure steps to find out the source of the money being invested in banks. But here they were giving a short thrift towards KYC norms. They were even agreeable to breaking FEMA and other laws.
Q. Is not expose too late when it is clear these dirty tactics of private banks were going on for last many years and everyone including media was simply glamourising them. Asked by: Hitesh
A. Its sad that the media lionised the banking sector. Its not the business of media to be giving "banker of the year" awards. It gave these banks a legitimacy they did not deserve.
Q. Govt has maintained that PAN card and now aadhar will solve corruption but is is now clear that corruption in India is only going to grow with both govt and corporate patronage. Asked by: Manav
A. Pan cards are not a holy grail. If the bankers don't implement the laws properly what its redundant.
Q. Is govt going to be serious now in sorting out the black money issue or it will be just like in Ramdev case they will shoot the messenger to defend themselves. Asked by: Manush
A. There is a healthy tradition to shoot messengers in this country. But I challenge the CEOs and chairmen of HDFC, ICICI and Axis Bank to an open debate. This laundering culture cannot exist without a mixture of both gross negligence and connivance of senior management.
Q. What is money laundering? Why are banks involved? How can we prevent? Asked by: Riyank
A. We have enough laws to prevent money laundering in this country. Problem is our oversight agencies are not doing a proper job
Q. What role has media to play in all this as they run after these banks and business houses for advertisements and give them awards at functions without sound basis making corporate executives feel like film stars? Asked by: Arvind
A. Media as a rule should not be in the business of giving awards. It compromises their ability to do reports and investigations. Also, the media has not been covering it in the manner they should. This concerns the financial health of the system. Media platforms should give a disclosure about the extent of sponsorship they have from these banks and also about quantum of loans. And whether they have any private equity placements from the banks or their entities. The so called experts appearing on tv should also make it clear whether they have any economic relationship with these banks.
Q. Is Cobrapost going to do similar exposes on other sectors like Real estate, public schools, food middleman where money laundering is common? Asked by: Shailesh
A. We are a small organisation. We can't take up all issues. We don't have the resources to do so.
Q. Does the country have a robust and independent investigative agency to investigate these operations as most of them are pushed under the carpet to avoid further embarrassment. Asked by: Shailesh
A. The country has investigative agencies with competent people. But competence needs direction and leadership from the top. If it doesn't get it the agency will be toothless.
Q. What role has RBI and its governor has in all this as on one end it gives assurances of sound banking system comparable with best in the world and on the other side there is no monitoring of its member banks flouting govt norms? Asked by: Shailesh
A. Indeed the RBI's functioning as a regulator needs to be questioned. If they need more resources they should be provided that. We need a banking regulator with teeth and competence.
Action will be taken against guilty in bank scam: FinMin
The government has said action will be taken if any person is found guilty in the alleged money laundering scam involving three private sector banks which was exposed by a website.
“Both RBI and Ministry have got into the act. So, we are collecting the information, the channels have been contacted. Once we establish what is the truth of the matter, we will decide on the further course of action. But prima facie this is a serious matter,” Financial Services Secretary Rajiv Takru said.
The comments follow Cobrapost website playing what it said was video recordings of officials of HDFC Bank, ICICI Bank and Axis Bank allegedly agreeing to receive unaccounted sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.
“It is too premature to talk of the banks are offenders. We need to establish that first. It is unfortunate that it has happened. We are all shocked and surprised. If the fact is established, then whoever is guilty will pay the price,” Mr. Takru said.
He said there is a possibility that the whole expose, which covers several branches of the banks, would be probed by government agencies.
“If there is any truth in it, then only needs to be probed in-house, but it needs to be probed by outside agencies as well, which of course is going to be done,” he said.
He further said the information which appears to have been collected from various bank branches at number of locations and not a single branch “is a matter of greater worry”.
“I would say it is either a remarkable coincidence or there could be more to it which needs to be looked at more seriously,” he said.
Mr. Takru said the government would have to first establish the violation and “in case violations are found, there would be a very severe reaction and we would come down with a very heavy hand”.
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