RBI fines 22 banks over KYC, other norms violations

Reserve Bank of India says no prima facie evidence of money laundering

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In one of the major crackdowns on banks in recent times, the Reserve Bank of India (RBI) penalised 22 for violating several norms, including the rules on know your customer (KYC) and anti-money laundering. Penalties ranging from Rs 50 lakh to Rs 3 crore were imposed on 12 public sector banks, nine private sector banks and a foreign lender, Deutsche Bank.

The action follows scrutiny of bank books, internal control and compliance systems and processes of bank officers during April, after online portal Cobrapost alleged rampant violation of KYC and anti-money laundering rules in bank branches in their sting operation. Earlier, following the Cobrapost allegations, RBI investigated the books of top private banks and fined ICICI Bank, HDFC Bank and Axis Bank for similar norm violations. Axis Bank was fined Rs 5 crore, HDFC Bank Rs 4.5 crore and ICICI Bank Rs 1 crore.

Those found guilty of violating the norms include country’s largest lender the State Bank of India (SBI), and other large public sector lenders Canara Bank, Bank of Baroda, Bank of India and Central Bank of India. Among private sector lenders were Federal Bank, YES Bank, Kotak Mahindra Bank, DCB Bank and Dhanlaxmi Bank. The banking regulator has also issued a cautionary note to seven lenders, of which six are foreign banks, Standard Chartered and Citibank, though no penalty was imposed, as norm violation of a serious nature could not be established.

The central bank, however, clarified the investigations did not reveal any prima facie evidence of money laundering and conclusive inference can only be drawn by an end-to-end investigation of the transactions by tax and enforcement agencies. Apart from circumventing KYC and AML norms, banks have also been found to have sold gold coins for cash beyond Rs 50,000, non-adherence to instructions on import of gold on consignment basis, violation of KYC for walk-in customers in  sale of third-party products and omission in filing of cash transaction reports in respect of certain transactions, among others. The penalties have been imposed in exercise of powers vested in RBI under section 47(A)(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949, a press release issued by RBI said.