IOB suspends new issue funding at branch level

Indian Overseas Bank (IOB), tainted by the IPO allotment scam, has withdrawn the powers delegated to branches to sanction loans for purchase of shares in public issues.

The bank has tightened the norms for funding of purchases of shares in public issues, including initial public offers (IPOs).

The public issue funding branches will now only receive loan applications and the power to sanction the loan has been centralised at the headoffice in Chennai.

"Branches are involved in public issue funding will have to take the headquarter's permission to advance loans," chairman and managing director T S Narayanasami said.

It has already initiated a disciplinary action against the manager of its branch in Ahmedabad for the bank's involvement in the IPO allotment imbroglio.

The Reserve Bank of India had slapped a fine of Rs 15 lakh on IOB for opening multiple accounts without adhering to know your client (customer identification) norms and providing IPO finance to fictitious individuals to facilitate manipulation the IPO allotment process.

The penalty was also imposed for failing to monitor and report the unusual and suspicious transactions and the failure of internal controls in monitoring non-compliance of KYC policies. Six other banks have also been penalised by the RBI for their role in the IPO allotment scam.