The government and Reserve Bank of India (RBI) are set to bring out tougher norms for cooperative banks, which have come under scanner for alleged discrepancies and irregularities in the wake of the demonetisation drive.
According to a recent report by the income tax department, most banks have indulged in money laundering after the Narendra Modi government announced ban on high-value bank notes of Rs 500 and Rs 1,000 from November 8 midnight.
Many banks accepted and exchanged the old currency notes at a premium and parked large deposits in multiple accounts, the report added. Moreover, several accounts have been opened without following Know-Your-Customer norm, the report pointed out.
A senior government official said these banks could become conduits for black money in the future.
At present, the scrutiny and vigilance on these banks is not as stringent as that on scheduled commercial banks.
“These banks need to be monitored as carefully as any other scheduled commercial banks have been used for a large number of inappropriate activities in the past and these can be used for the same purpose in the future,” the official, who did not wish to be identified, said.
“The demonetisation drive has been used as an excuse by several of these lenders to make quick money,” the official added.
The report also pointed out that a cooperative bank in Alwar was used to launder personal unaccounted cash of Rs 2 crore by the management.
Similarly, in another bank in Jaipur, Rs 1.5 crore was found stashed away in a cupboard in a “cleaning” room.
Besides, more than 2,000 new currency notes of Rs 2,000 were withdrawn from the bank illegally.
While the cooperative banks have played a chief role in financial inclusion and many farmers and people categorised as low-income group are still dependent on these lenders, they have also indulged in illegal activities.
As on March 31, 2015, there were 32 state cooperative banks, besides 370 district central cooperative banks.