Cobrapost fallout: Govt, RBI looking at hiking penalty amount

Earlier penalty per violation was Rs 5 lakh. This was raised to Rs 1 crore after Banking Regulation Act was amended by Parliament last year

Finance ministry today said that it is looking raising penalty limits for the violations of Reserve Bank of India norms by the banks.

"The maximum penalty under the law is Rs 1 crore now and that is very less. There is active discussion now on increasing limit of penalty. So that is something which is under consideration," Rajiv Takru, secretary, department of financial services told reporters today. 

“As a matter of fact, this (hike of penalty) was discussed at the RBI board and a point was made that the penalty amount is probably less," he added.

Earlier the penalty per violation was Rs 5 lakh. This was raised to Rs 1 crore after Banking Regulation Act was amended by the Parliament last year which gave RBI more powers like superseding the rogue bank’s board failing to adhere instructions of the central bank.

Post online portal Cobrapost’s sting operation, RBI has sent show cause notices to three private banks which were alleged by the portal of indulged in money laundering activities. RBI had completed investigation in respect of these three banks.  Investigations are ongoing in other banks which were also later alleged of similar wrongdoings by Cobrapost.  

Takru said central bank would await for the replies of the banks before deciding on the action to be taken against these banks. Takru reiterated the same when asked about would there be action on top management of these banks.

Asked about the leaked reports in media about RBI’s investigation report which states contrary facts unlike RBI’s top brass Takru said, “ (I’m) not sure, what has come out in the media, the RBI report is anyway being acted upon...the RBI can only take a final stand after the show-cause notice is replied to. So, I don't think you should take any statements by anyone as finality in this case."

When asked about insurance products used as a route to covert black money into white Takru said, “we are aware of the problem and it is being addressed.” 

He further said that "we are checking out all transactions where large premia have been paid (and) in cases where multiple policies have been taken by the same PAN numbers, such numbers have been isolated and they have been looked at very carefully.

“The minute, we zero in on the people who could have converted black money through this route, then the law will take its own course” he said.