Standard Chartered, Tamilnad Mercantile Bank issued FEMA violation notice

The Enforcement Directorate (ED)Thursday issued notices to Tamilnad Mercantile Bank (TMB) and Standard Chartered Bank for contravention of Foreign Exchange Management Act (FEMA) in the transfer of TMB shares.

The violation by the two banks is put at Rs.608.35 crore.

In a statement issued here, the ED said during May 2007, certain non-resident investors acquired shares of TMB.

The Reserve Bank of India (RBI) suspected violation of FEMA and referred the matter to ED.

During investigations, the ED found TMB, its chairman, directors and company secretary contravened the provisions of FEMA in transferring 46,862 shares of the bank to foreign entities without RBI's prior approval.

In December 2011 and June 2012, similar transfer of shares were made without RBI's permission.

The total value of the contravention is put at Rs.274.03 crore.

The ED during its investigation also found Standard Chartered Bank, Mumbai contravening FEMA provisions in opening and operation of an escrow account for the said share transfer.

The bank was also found to have contravened the provisions of FEMA in taking custody of immovable properties in India and shares of TMB for providing collateral/guarantee to a loan availed by the foreign investors in the Mauritius branch of Standard Chartered Bank.

The contravention of Standard Chartered Bank was identified to be Rs 334.32 crore, the ED said.

According to ED, the then chairman of TMB (in 2007) M.G.M.Maran facilitated the share transfer from Indian investors to non-resident investors and accordingly received a consideration to the tune of $6.85 million in his overseas account in Singapore.

As maintenance of such account and transfer is against the provisions of FEMA, the ED is also proposing action against Maran.