The list of banks hauled up by the Reserve Bank of India (RBI) for violating Know Your Customer (KYC)/Anti-Money Laundering norms is expanding. It includes the country’s largest bank, State Bank of India, and other public sector banks such as Punjab National Bank, Bank of India and Canara Bank. Earlier, three ‘new generation’ private banks — Axis Bank, HDFC Bank and ICICI Bank — were slapped with stiff fines by the central bank whose investigations followed an expose by online portal Cobrapost. The latest list includes the relatively new Yes Bank as well as some old private banks such as Lakshmi Vilas Bank.
Leading foreign banks, Citibank, Stanchart and a few others, while not having to pay a fine, were given cautionary letters.
Whether those, or for that matter even the higher order of penalties (the fines) will be a sufficient deterrent remains to be seen.
The RBI would do well to release at least a synopsis of its findings in each individual case. As much as bankers, the general public ought to know what is happening in so many banks which truly represent all categories.
It is evident that the breach of rules and regulations has been widespread, and no single category has been blamed entirely. Even at a preliminary level that implies the RBI’s even-handedness although some banks at the receiving end may not think so.
Also obvious is that motivation for these dubious transactions comes from the most basic desire of bankers to book business at all costs. It is likely that the operating staff’s controllers — the regional managers and so forth — were aware of the nature of these transactions and winked over them. But at crunch time like this will they stand by their employees?
The public sector banks, especially SBI, have plenty of introspection to do. Their culture should normally abhor risk taking. For the operating staff, there are no special rewards for doing exceptional business. For foreign and Indian private banks, it may be different. In the 1991-92 stock market scam, the Joint Parliamentary Committee held the foreign banks to be responsible. But not a single senior banker in the foreign banks was ever hauled up in civil or criminal proceedings. On the contrary, some of the key players emerged, with the support of their banks, as entrepreneurs, consultants and so on.
Very different for PSBs
Even 21 years on, some of them have not seen a dénouement. In the coming days, all the implicated banks would no doubt try to spruce up their image. Whether that would mean apportioning the blame on individual staff members (who were caught in the expose) or accept that there was a collective failure is to be seen.
Keywords: RBI, money laundering norms, KYC norms, money laundering charges, cobrapost exposé, KYC norms violation, SBI, Axis Bank, ICICI Bank, HDFC Bank, Cobrapost, RBI, Know Your Customer norms, United Bank of India, Lakshmi Vilas Bank, Punjab National Bank