Sting bares money laundering at top private banks

The stocks of top private lenders ICICI Bank, HDFC Bank and Axis Bank on Thursday swung as much as 5-6.3% each in volatile intraday trading.

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The stocks of top private lenders ICICI Bank, HDFC Bank and Axis Bank on Thursday swung as much as 5-6.3% each in volatile intraday trading after an expose by online magazine Cobrapost showed officials of these banks willing, and facilitating deposit of black money into various accounts and products.

The lenders are running a nationwide money laundering racket, the online magazine, headed by journalist Aniruddha Bahal, alleged.

The website screened hours of footage from a sting operation codenamed ‘Operation Red Spider’, spanning months.

The sting involved a reporter posing as a conduit for a top politician keen to convert his ill-gotten wealth into white. He “visited dozens and dozens of branches across the length and breadth of the country, including many major cities and state capitals, across all five zones. Nowhere was he disappointed. Nowhere was he turned away”, said a Cobrapost

“The ways these major banks suggested to transform the black money into white were both imaginative in their range and brazen in their approach. This brought to the fore a modus operandi that is tailored to rake in vast amounts of black money in the form of illegal deposits, insurance and investment products, sold by these banks. All these creative means make the dirty money squeaky clean without the regulatory authorities ever getting a whiff of what they are doing,” the release said.

The banks quickly swung into damage control, saying they maintain high corporate governance standards and view any deviation from policy and procedure very seriously, and that they have launched internal investigations to get to the truth.

None, however, denied the charges outright.

The Reserve Bank of India (RBI), too, was non-committal. “At the moment, RBI is collecting information. We are in touch with the banks. That’s all I can say as of now,” RBI deputy governor Urjit Patel said.

No show-cause notice has been sent to any of the banks yet, Patel said to a query.

Goldman Sachs analyst Tabassum Inamdar said the allegations, if proved true, could lead to slower growth in deposits and business for private banks as the Reserve Bank of India may then direct banks to focus on improving risk management rather than expanding.
“However, it is difficult to ascertain the extent of the slowdown till more clarity on these developments is provided by the banks,” she said.

A senior official of a public sector bank was quick to point a finger at private sector peers.
“Private banks are flouting RBI norms all the time and they are not even penalised much.
This does not happen much at PSU banks because PSU banks have a strong union and no employee can be pressurised to do something wrong. But private bank managers can’t resist,” he said.

Rajesh Goyal, a retired Punjab National Bank official, could not agree more. Unlike public sector banks, the private banks are under immense pressure to grow and make quick money, he said.


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