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RBI Starts Scrutiny of Three Banks -  Will RBI Hush Up Cobrapost Disclosures Too Like It Did for Rs 32,000 crore Derivative Scam ? 

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Rajesh Goyal



Cobrapost disclosures have sent shock waves as sting was conducted across private sector banks and covered a majority of big cities.    I have been writing on  for long time to take cognizanceof the misuse and mis-selling of many products by banks.     I have strongly advocated time and again that sale of gold coins, mutual fund schemes and insurance policies by banks must be stopped as there is total collapse of corporate governance in banks.  Every banker is well aware that employees are cajoled and threatened by corrupt top brass of the banks to adopt unfair practices so as to achieve the targets for sale of third party products and earn incentives in cash and kind from CMD to the person who had actually sold the products.  They are least bothered if it hurts the nation by laundering black money.   Now with hard core evidence captured on camera, RBI, Income Tax authorities, MoF have been left with no choice but to start enquiries.    Reports have come up that RBI has started a comprehensive scrutiny of Head Offices and branches of ICICI Bank, HDFC Bank and Axis Bank, which are accused of money laundering and violating regulations like FEMA and KYC.    The scrutiny will be completed by 31st March, 2013.



I still remember the role of RBI in hushing up the Rs 32,000 crore derivative scam where banks were merely fined upto Rs 15 lakhs though country lost thousands of crores of rupees.   I understand that scam in Derivatives is  still pending in Court, neither any bank or the regulator is ready to bring and publish a comprehensive details of that scam.   Thus, I am afraid that this case too may meet the similar fate.    However, one fact has given me some hope i.e. the deadline of 31st March, 2013.   Usually, in such cases, politicians buy three to four months time (later on time is extended) so that evidence can be destroyed by the respective organisations and public memory fades away.    I will like to give full marks to RBI Governor for fixing a short deadline for investigation this time.


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However, the real intentions about the investigations will be clear only if after receiving the report the same is published too and put in public domain within a week's time or so i.e. by 10th April, 2013.   Then follow up action be started.      RBI should ensure that the loot through mis-selling and selling products  to black money holders must be recovered.   The incentive / commission earned  by bank and respective employees during last 5 years through sale of insurance policies, mutual funds and gold coins and other wealth management products must be recovered from them.    Moreover, there is a need for strict action against the people who have indulged into such activities by filing FIR against the top brass rather than junior staff as it is usually under pressure and instructions of top brass that juniors have to do such activities.


RBI needs to introspect and the penalitiies and punishment should be based on the actual loss to nation by such activities of the top management.   I would also like that RBI is more transparent in Derivative scam and releases full details of the loss to corporate and to the nation on account of miselling of derivative products by various banks.  Hushing up of such cases actually encourages the top bosses to indulge into large scale violations of RBI / FEMA / KYC norms as they are aware that RBI is afraid of taking strict actions.


Mr Subbarao has shown lot of courage during last few years by standing against all presurres of corporate and GoI.   I hope he will once again prove himself to be the most upright Governor and take action so that there is clean up of the malpractices in the banking industry.










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