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HindustanTimes Mon,21 Apr 2014

Direct transfer hurts banks’ KYC norms

Mahua Venkatesh, Hindustan Times  New Delhi, July 21, 2013
First Published: 21:47 IST(21/7/2013) | Last Updated: 22:46 IST(21/7/2013)

In its hurry to spread the direct transfer scheme aimed at aiding beneficiaries of government welfare schemes, India's bankers may be slackening on a key regulatory requirement — Know Your Customer (KYC) norms.

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Bankers who did want to be identified told HT that lenders are under pressure to cover as many unbanked households as possible as possible by 2014 — an election year —  and this often involves the process of checking the antecedents of customers.

“When we deal with rural customers, we find in most cases that they do not have the required documents and we relax norms for them with a view to bringing them under the banking net, at this point financial inclusion is critical,” a source said.

Recently, investigative website Cobrapost revealed that several banks — public and private — have failed to adhere to the KYC norms.

http://www.hindustantimes.com/Images/Popup/2013/7/22_07_biz3.jpg

While banks have been directed to cover atleast one household by 2014, the  centre is keeping a close eye on the progress of expansion of branch network and addition of unbanked households into the financial services net.

According to finance ministry data, the country has more than 246 million households in total, of which 58.7% are covered under the banking net. However, more than 40% of the households in states such as Tamil Nadu, Gujarat, Madhya Pradesh, Andhra Pradesh and Jharkhand still do not have a bank account while the figure goes up to more than 50% in Manipur, Assam, Bihar, Madhya Pradesh, Orissa, West Bengal and Meghalaya

“With such pressure to expand banking network, it is natural that there are a few lapses,” a senior bank executive said.

In the previous financial year, more than 70 lakh no-frill accounts have been opened. The government has asked banks to focus on areas where the penetration of banking net is low.

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