This is a recent news. Two big private sector banks of India -
1) ICICI Bank – the largest private sector bank, and
2) ING Vyasya Bank – a bank promoted by ING group of Dutch land and Vysya bank.
have been fined heavily for not maintaining KYC details of customers as per guidelines of the Central Bank. The Reserve Bank of India has been very strict these days on defaulting banks. ICICI Bank has been fined Rs.30 lakhs while ING Vysya Bank has been fined Rs.55 lakhs. This comes equivalent to USD 56,000 and USD 103,000 respectively. May be these banks have been given warning earlier for not adhering to KYC norms. A detail of this notice has appeared on RBI’s website.
These penalties were for “failure to obtain adequate documents for opening accounts, failure to carry out sufficient customer identification procedures, failure to examine control structure of entities, failure to ascertain the identification of natural persons behind entities, failure to carry out effective enhanced due diligence, failure to carry out appropriate risk categorisation and delay in filing the suspicious transaction reports,” RBI said.
In one of my previous post, I had categorically mentioned why KYC norms are important and why the banks have to follow these norms strictly. However, some banks do not take care of these important guidelines seriously and maintain their records very casually. A well informed KYC details help law enforcement agencies to control money laundering cases as well as for tracing the criminal act of funding to terrorists organizations. You can revisit the previous post here:
The RBI penalty may be a lesson for those defaulting banks, who have still to follow the guidelines. The KYC norms are increasingly becoming standards to maintain customer’s record. Not only banks, but other financial institutions also have to maintain KYC norms and adopt best practices. It is in the best interest of the nation, customers as well as the banks.
If we refer to two years old story, during first half of the year 2010, Bank of Rajasthan(BOR) was also fined Rs.25 lacs for not maintaining proper records and misrepresentation of documents. Crisis was averted after RBI given its permission to merge BOR to ICICI Bank. Now, after two years, the ICICI Bank is on the receiving end. Are we talking about the same old records of Bank of Rajasthan? If yes, why ICICI Bank has not taken timely steps to correct the incomplete records. After all, two years is a long period to take corrective steps. Can we assume that the most trusted brand of private sector banks is also approaching its crisis days?
The RBI press release is linked here:
It would be interesting to go through the following interview of ING Vysya’s MD published in DNA and decide yourself about this bank: