KYC norms: RBI fines 22 banks

Written by fe Bureau | Mumbai | Updated: Jul 16 2013, 06:21am hrs
Four months after online news magazine Cobrapost's alleged that a large number of banks were flouting norms and may be allowing customers to launder money, Reserve Bank of India imposed a collective penalty of R49.5 crore on 22 banks for violation of know-your-customer and (KYC) anti-money laundering norms.

SBI, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India and Indian Overseas Bank were among the public sector banks fined R3 crore each. Among private sector banks, YES Bank and Dhanlaxmi Bank were fined R2 crore each, while Kotak Mahindra Bank and ING Vysya were fined R1.5 crore each.

After considering the facts of each case and individual banks reply, as also, personal submissions, information submitted and documents furnished, RBI concluded that some of the violations were substantiated and warranted imposition of monetary penalty, RBI said in a release on Monday.

While government officials including banking secretary Rajiv Takru had argued in favour of steeper fines being imposed on banks to stem such malpractices, RBI had expressed the view that the practice of imposing a fine of R1 crore per violation was adequate. The fines imposed are in keeping with that practice.

In June, RBI had fined ICICI Bank, HDFC Bank and Axis Bank a total of R10.5 crore for similar KYC norm violations. The largest fine of R5 crore was imposed on Axis Bank, while HDFC Bank and ICICI Bank paid R4.5 crore and R1 crore respectively.

The fine came after an RBI enquiry into the Cobrapost expose which alleged that the country's top three private sector lenders ICICI Bank, HDFC Bank and Axis Bank were not following KYC norms that may have allowed money laundering through their branches. Subsequently, the online portal released videos showing similar practices across several public sector banks.

Following the expose, the RBI had initiated a thematic enquiry on all banks and the study observed transgressions in KYC norms by many lenders. The study found banks had not adhered to KYC norms such as customer identification procedures, periodic review

of risk profile of account holders among others.

Some banks had refrained from filing cash transactions receipts and had accepted cash for purchase of gold coins valued above R50,000. However, no serious money laundering transactions were observed, according to the findings of the RBI. However, any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies, RBI said.

The central bank also listed seven other banks that were issued cautionary notices but not penalised. These included Citibank, Barclays Bank, Royal Bank of Scotland and Standard Chartered Bank. Deutsche Bank is the only foreign lender penalised so far with a penalty of R1 crore imposed.

RBI also said seven more banks were scrutinised in April and May. The process of follow-up action in respect to these banks is at different stages of its completion, the RBI said.