Bank CMDs & EDs Encourage Flouting of KYC Norms -
RBI Sleeps -
Cobrapost Exposes -
Now Poor Investors Pay the Fine –
No actions against Real Culprits -
This is Indian Democracy
by
Rajesh Goyal 
As news of peanut penalty of Rs 49.50 crores on 22 Banks flashed on my TV screen, I felt disgusted as this expose has also ended like our other scams involving politicians.
It is one more sordid scam, which has been encouraged by CMDs / EDs of all these banks under the very nose of RBI. Scam was exposed by not the regulator but by an online portal. Immediately, suspension of some junior officers took place. Soon internal enquiries of such banks mostly gave clean chit to themselves. Most of the suspended officers were re-instated as deeper enquiries would have revealed the name s of top bosses. When cornered by overwhelming evidence on camera, regulator imposes peanut penalties.
Who will bear the cost of such penalties?
It is the poor public i.e. shareholders of these banks, as payment of such penalties will reduce profits and / or dividends. It is not going out of pockets of any CMD or Board Directors.
In any other part of the world, strict action would have been taken against top brass too and Bank Boards would have been made accountable for such lapses. Basel too has such provisions for holding Board responsible for risk management. This episode has already dented the reputation of these banks.
Can RBI spell who should be accountable if there is increased risk of reputation due to acts and omissions of bank officers at such a large scale?
Hats off to our regulator RBI for such a blatant injustice to the poor public and shareholders !!
Gullible common man feels action has been taken against the guilty as for a poor man a crore is a huge amount. Is it so. No, indeed it is a great injustice to not only to shareholders of these banks but to also a common Indian.
Can a shareholder not go to Court against RBI for letting the real culprits go scot free ?
Can shareholders of these Banks have powers to remove CMDs / EDs or other top brass who are guilty of breach of trust ?
I am sure if this issue is taken up by top lawyer or activist like Mr Subramaniam Swamy or Jethmalini, the top brass of these Banks and even RBI will be in soup. However, in the existing normal circumstances, the minority shareholders (in most of the PS Banks, the majority share is held by Government) can not get such a resolution passed against the Board of the respective bank
The scale and magnitude of flouting of norms is now well established as 22 banks across India have been fined by RBI.
Can such a large scale violation of RBI norms can take place without the active connivance of top brass i.e. CMDs and EDs?
In an industry where we have hardly any whistle blowers, it is impossible to think that such large scale violation can occur without the active connivance of top brass.
A feedback from junior officers will clearly give an idea as to how they are treated in Review Meetings for missing the targets. The Managers, Sr Managers and Chief Managers are bullied and made fun if he talks about RBI norms. Violators of such norms tell their success stories in such Review Meetings without any shame. Top brass encourages them and scolds the honest bankers. At the time of promotions, such violators get priority as they are considered as the people who will take the bank forward.
Will any Indian media show some courage to take up this issue to the logical end i.e. action against the real culprits who have been encouraging, junior officers to flout the KYC norms for meeting targets, earning higher commissions for them from sale of insurance policies or earn some foreign trips by mis-selling of third party products?
The news item which I read online ended with following words RBI said that "any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies". This is a typical Indian style of any investigation i.e. shift the blame on some other agencies – this type RBI has merely passed the baton to tax and enforcement agencies.
Great end to Great Episode! I think I was wrong in expecting some fruitful action, inspite of the fact that one of the outspoken DG of RBI had given clean chit to private banks even before investigation has started in one of the Cobrapost expose.
RBI slaps fine on 22 banks for violating KYC/anti-money laundering norms
MUMBAI, JULY 15:
The Reserve Bank of India (RBI) has penalised 22 banks, including the country’s largest bank State Bank of India for violation of its instructions, among other things, on Know Your Customer (KYC)/Anti Money Laundering (AML) norms.
Monetary penalty
Among public sector lenders, State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, and Indian Overseas Bank have been imposed a monetary penalty of Rs 3 crore each, while Punjab Nation Bank, Andhra Bank and United Bank of India are charged with Rs 2.5 crore each.
Among private sector banks, RBI has penalised Federal Bank (Rs 3 crore), YES Bank (Rs 2 crore), Kotak Mahindra Bank Ltd (Rs 1.5 crore) and ING Vysya Bank (Rs 1.5 crore).
Earlier, the central bank had penalised Axis Bank (Rs 5 crore), HDFC Bank (Rs 4.5 crore) and ICICI Bank (Rs 1 crore) in June.
Seven other banks - Barclays Bank, BNP Paribas, Citibank, Royal Bank of Scotland, Standard Chartered, State Bank of Patiala and Bank of Tokyo Mitsubishi UFJ - faced similar scrutiny and the banks’ written or oral explanation were found to be satisfactory or no violation of serious nature has been established.
It has, therefore, been decided not to impose any monetary penalty but to issue only suitable cautionary letters, RBI said.
A similar scrutiny was also conducted in seven other banks during April and May 2013. The process of follow-up action in respect of those banks is at different stages of its completion.
RBI scrutiny
The Reserve Bank of India had carried out a scrutiny of books of accounts, internal control, compliance systems and processes of these banks at their offices during April.
The scrutiny revealed violations such as non-adherence to certain aspects of KYC norms and AML guidelines like customer identification procedure, risk categorisation, periodical review of risk profiling of account holders and periodical KYC updation.
Non-adherence of norms
It also referred to non-adherence of KYC norms for walk-in customers including for the sale of third party products, omission in filing of cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs 50,000 among others.
The central bank said the investigation did not reveal any prima facie evidence of money laundering. However, any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies.
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