The Reserve Bank on Friday said it has not given clean chit to ICICI Bank, HDFC Bank and Axis Bank, which are accused of money laundering and flouting KYC norms, and stated the probe against the three banks is still on.
“No we have not. And we are saying that we are (going) to issue show-cause notices. So, the inquiry is still in progress,” RBI Governor D. Subbarao told reporters when asked whether the apex bank had given clean chit to the three banks.
Mr. Subbarao, speaking at the customary post-policy media interaction, asserted that while money laundering, which involves use of criminal money, has not been observed in any of the banks, certain “specific transgressions” on the know your customer (KYC) front have been discovered.
“We have talked to those banks, called those CEOs for a meeting, told them about what the deficiencies are and they have gone back and implemented some of the systemic improvements,” Mr. Subbarao said, adding RBI officials have also spoken with forensic auditors appointed by these banks.
Mr. Subbarao said the RBI launched a suo motu probe following the sting operation by news portal Cobrapost early February showing officials from ICICI Bank, HDFC Bank and Axis Bank selling investment products without paying heed to the mandatory KYC norms. It later turned into a thematic study involving over 30 banks in the country, the Governor said.
Deputy Governor K.C. Chakrabarty, who had in March given a near clean chit to these banks saying there were no transactions, today said the show-cause notices will be sent not just to these three banks, but all erring lenders.
“Whomsoever we find that there are mistakes, there are transgressions, violation of the thing, we will definitely issue show-cause notice and take the appropriate action,” Mr. Chakrabarty said, adding there are no systemic issues.
“The system is strong enough but there are aberrations and we are trying to improve that,” Mr. Chakrabarty, who oversees banking regulation at the monetary authority, said.
In its annual credit policy review, Mr. Subbarao said the RBI’s probe into the allegations has revealed that the banks did not follow KYC norms while selling thirdp-party products and also came out with a string of corrective advisories for banks.