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RBI heat on bank honchos after expose of money laundering

Mahua Venkatesh, Hindustan Times  New Delhi, May 19, 2013
First Published: 23:22 IST(19/5/2013) | Last Updated: 23:23 IST(19/5/2013)

The Reserve Bank of India (RBI) has moved to hold senior banking officials directly accountable for violations of supervision lapses under their nose that lead to money laundering and other wrongdoings.


In a move reminiscent of the corporate laws put in place after the Enron scandal in the US, the RBI is likely to review the “fit and proper” criteria and banks will now be mandated to formally declare that its senior officers have done the due diligence required in dealing with shady customers.

A final decision on the issue, however, would be taken after due deliberations, said sources

A recent sting operation by investigative website Cobrapost alleged unfair practices at three private sector lenders — ICICI Bank, HDFC Bank and Axis Bank.

According to the RBI, the process of due diligence should be undertaken by private sector banks at the time of appointment or even renewal of appointment.

The RBI could also come out with stricter guidelines on the same and companies seeking new licenses could face stiffer compliance issues, sources told HT.
“This issue may be looked at by the central bank, though a final decision is yet to be taken and there could be tightening of norms which would also be applicable to those which apply for fresh banking licenses,” an official source, who did not wish to be identified, said.

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