Mumbai, May 3: The Reserve Bank of India said today it had not yet given a clean chit to the country’s top three private banks that were sucked into a controversy when a sting operation showed rogue officials at some branches blatantly offering advice to prospective customers on ways to launder unaccounted money.
The sting operation showed serious transgressions of the know-your-customer (KYC) norms.
The central bank said today that its investigations in the past had also revealed similar transgressions by other banks and it would be issuing show cause notice to all these lenders shortly.
A sting operation conducted by online magazine Cobrapost had accused the three lenders — ICICI Bank, HDFC Bank and Axis Bank — of facilitating money laundering.
“We have not (issued a clean chit)… we are going to issue show-cause notices. So, the inquiry is still in progress,” RBI governor Subbarao told reporters here today.
All three banks have denied any instance of money laundering at their branches.
The RBI said it had also undertaken a thematic study with respect to banks that were active in selling gold coins or wealth management products to determine whether there were any systemic lapses. Subsequently, the RBI widened its probe to include 30 major lenders in the country.
Subbarao said the RBI had observed a number of specific transgressions, particularly relating to KYC norms, at many banks.
“We called the CEOs of these banks for a meeting and told them what the deficiencies were. They have gone and implemented some of the systemic improvements. We have talked to the forensic auditors appointed by the banks. Now, we will of course be issuing them show-cause notices and on the basis of that (reply), we will take action,” Subbarao said.
The governor added that guidelines would be issued to banks on what they need to do to comply with the rules after the thematic study is completed.
Deputy governor K.C. Chakrabarty said the show-cause notices would be sent not just to these three banks, but all erring lenders.
“The system is strong enough but there are aberrations and we are trying to improve that,” said Chakrabarty, who oversees banking regulation at the monetary authority.
In its annual credit policy review, Subbarao said the RBI’s probe into the allegations had revealed that the banks did not follow KYC norms while selling third-party products.