Time to cleanse banking in India, The New Indian Express, July 17, 2013
Time to cleanse banking in India
17th
July 2013 07:11 AM
In what
is probably the single biggest penal action in the history of Indian banking,
the Reserve Bank of India (RBI) has imposed stiff penalties totalling to ` 49.5
crore on 22 public and private sector banks for violating anti-money laundering
and know-your customer regulations. This follows slapping of fines totalling to
` 10.5 crore against three “new generation” private banks on the same grounds
following an expose by an online portal. As similar inquiries against other
banks are reportedly at different stages, the list is likely to grow. The fact
that the RBI found such a large number of banks violating its regulations shows
that the breach is widespread and cannot be explained simply by the banker’s
overzealousness to book business at any cost, especially in case of public
sector banks whose culture is against undue risk taking.
Though
the RBI claims that its inquiries did not reveal any prima facie evidence of
money laundering, it has not given them a clean chit on this account and added
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 too serious a matter to be foreclosed with mere imposition of fines.
The RBI should make its findings public so that people know what is happening
in the banks to which they entrust their hard-earned money.
The
government should immediately constitute a special investigation team of
officials from the RBI, the directorate of enforcement and the income tax
department to probe the suspected cases of money laundering. In the 1992 stock
market scam, the joint parliamentary committee had held some foreign banks
responsible. However, no civil or criminal proceedings were initiated against
any banker and some of the key players subsequently emerged as entrepreneurs
and consultants with the support of their banks. This time, the government
should not allow the issue to be swept under the carpet.
Comments(6)
This is a timely caution to
government and regulators in the financial sector. Perhaps, confused with the
shifting and dodging of responsibility by various authorities including finance
ministry in the financial sector, FSLRC went to another extreme of suggesting a
single regulator for financial sector. In the Indian context, such an
institutional change may not happen that soon. But, regulators and GOI as also
state governments should take cognizance of the blatant violations of
established law by several agencies and take remedial action by following a
coordinated approach. Coming to the limited issue of money laundering, finance
ministry should take immediate supportive measures to follow up the symbolic
action taken by RBI using its powers categorizing the goings on as a KYC issue.
Comments