Norm violation: Bank penalty may go up

Now, the maximum penalty under law is Rs 1 crore, and that is very less: Rajiv Takru

The finance ministry on Thursday said it was considering raising the penalty for violations of Reserve Bank of India (RBI) guidelines by banks.

"Now, the maximum penalty under law is Rs 1 crore, and that is very less. There is active discussion on increasing the limit of penalty. So, that is something under consideration," Rajiv Takru, secretary, Department of Financial Services, told reporters on Thursday.

"As a matter of fact, this (the rise in penalty) was discussed by 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. Last year, this was raised to Rs 1 crore, after the Banking Regulation Act was amended by Parliament. The Act gave RBI greater powers such as superseding a bank's board, if the bank failed to adhere to the central bank's norms.

Recently, RBI had sent show-cause notices to three private banks, which, according to Cobrapost allegations, had indulged in money-laundering activities. For these three banks, RBI has completed its investigation into the allegations. Currently, investigations are underway to ascertain whether allegations of wrongdoings against other banks are true.

Takru said the central bank would wait for the banks to reply, before deciding on action against them. On action against the top managements of these banks, he again said RBI would await the banks' replies. "RBI can only take a final stand after the show-cause notice is replied to," he said.

On insurance products as a route to covert black money into legitimate funds, Takru said, "We are aware of the problem and it is being addressed…We are checking all transactions in which large premia have been paid (and) in case multiple policies have been taken by the same PAN, 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, the law will take its own course," he said.