A probe launched by Reserve Bank of India following allegations of non-compliance with anti-money laundering measures and know your customer (KYC) norms by top private banks has reportedly found that cooperative banks are used as conduits.
Not having the entire bouquet of service offerings, the cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs. 50,000 from customers (the limit at which reporting to tax authorities sets in). They usually earn commission from larger banks for providing services.
When asked about the misuse of the system and if this amounts to regulatory arbitrage, Bakshi said, "It is the same regulation for everybody. Banking Regulation Act is same for everybody."
Online portal Cobrapost had in March made public a sting operation purportedly showing some executives at three top private banks -- ICICI Bank, HDFC Bank and Axis Bank -- allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.