Regulatory approvals may get tougher

Our Bureau

Mumbai, April 12

Banks that have been fined by the Reserve Bank of India for their involvement in the recent IPO allotment scam may find the going tough in the future.

The RBI will keep in view the violation of know-your-customer (KYC) norms by these banks while processing any application for regulatory approvals from them, a senior RBI official said today. This could also affect these banks' international dealings, he added.

Mr Lalit Srivastava, General Manager of RBI, also said that the quantum of penalties imposed on the banks is not important in the initial stages. However, the fine slapped on the banks were a signal to them.

Payment of the fines would have cleared them of the case as of now, but the RBI will take such violations into account when they consider any future regulatory approvals.

Mr Srivastava was speaking at a meeting organised by the Indian Banks Association (IBA) on compliance with KYC norms and anti-money laundering measures.

The banks fined in the recent IPO allotment scam include Bharat Overseas Bank, HDFC Bank, ICICI Bank, Citibank, Standard Chartered Bank, Vijaya Bank, ING Vysya Bank, and IDBI Ltd.

These banks had allowed opening of current accounts in the names of multiple companies on the same day and in the same branch. A single person was authorised to operate all these accounts.

Mr Srivastava said that the RBI has asked banks to strictly implement the KYC norms in all branches. Outsourcing the job of verifying customer information is prohibited under the KYC guidelines, he added.

(This article was published in the Business Line print edition dated April 13, 2006)
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