Penalties on banks in India 'peanuts', says RBI Governor

Subbarao said erring banks can face a maximum penalty of Rs 1 cr and it was up to the lawmakers to decide whether this should be increased

In the backdrop of recent violations of banking norms by some public sector as well as private banks, RBI Governor D Subbarao believes that penalties for such offences in India amounted to "peanuts" compared to those in the western countries.

Erring banks can face a maximum penalty of Rs 1 crore in India, he told PTI, adding that it was upto the lawmakers to decide whether this should be increased.

Barclays was penalised USD 450 million, he said in a reference to the fine imposed on the British bank last year to settle charges of manipulating key interest rates.

Asked about the recent expose in which officials of these banks were shown purportedly expressing their willingness to indulge in a whole of violations, Subbarao said the RBI planned to take early action against the errant banks.

"What action? I cannot tell you because action on this has to be taken at lower level at the RBI. So it is premature to conclude that the RBI is going soft or harsh on this.

"We got to follow a process. Just because media is investigating today, we can't say the RBI has to penalise tomorrow otherwise it is soft," he told PTI in an interview.

The Governor said that under rule of law, there is a process to be followed and it was being followed.

"After the process comes to a close, which I hope is sooner rather than later. If you believe the penalty has been too soft or too harsh, you have a privilege to make a statement," he said.

Referring to the special investigation that was done into Cobrapost's expose on some major private banks, Subbarao said the bank managements were issued show cause notices and action will be taken accordingly.

He said RBI alone cannot check money laundering and banks too cannot ascertain the source of money while taking deposits.

"Is this money laundering, we do not know...We are not saying there is no money laundering. I am saying whether this money laundering has to be investigated by a much bigger process involving much bigger agencies," Subbarao said.