Urban cooperative banks misused for money laundering

http://articles.economictimes.indiatimes.com/2013-10-30/news/43528981_1_money-laundering-urban-cooperative-banks-new-delhi

NEW DELHI: Urban Cooperative Banks (UCBs), which hold deposits of over Rs two lakh crore, are being misused for money laundering causing alarm to the government.
The matter of misuse of UCBs, over which there is dual control by central or state governments through multi-state cooperative societies or state cooperative societies, was discussed during a a recent meeting of Economic Intelligence Council (EIC), chaired by Finance Minister P Chidambaram.

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Saradha scam: 13 co-op banks under RBI scanner

Sumantha Ray Chowdhary wrote in the Hindustan Times (April 26)

The Reserve Bank of India (RBI) is probing the role of 13 cooperative banks in West Bengal where the tainted Saradha Group managed to park funds for conducting illegal transactions. According to RBI sources, these banks include two each in South 24 Parganas, North 24 Parganas, Howrah,

Hooghly, Kolkata and one each in Nadia, East Midnapore and West Midnapore. The RBI is of the opinion that the tainted group was able to open fake accounts either due to a lacklustre approach in verifying credentials of account holders through the know your customer (KYC) system or owing to the direct involvement of a section of bank officials, who are believed to be close to officials of the tainted group.
The apex bank’s regional head office in Kolkata has been instructed to carry out detailed investigation into such fake accounts in urban corporative banks as well as scheduled commercial banks in the state.
“Be it negligence on part of the authorities in verifying credentials of account holders or their proximity to group officials, we are determined to take stringent action against staff members who are found guilty,” said a senior RBI official.
In fact, only on February 25, 2013, urban cooperative banks were cautioned by the RBI to conduct periodic reviews of high-risk customers and also ensure that KYC guidelines are adhered to.
The apex bank also expressed dissatisfaction over the performance of a section of urban cooperative banks.
“There have been instances of urban co-operative banks being used as conduits for money laundering and other unlawful activities primarily due to non-adherence to KYC and other such guidelines, including absence of risk profiling of customers and lack of proper monitoring of transactions,” the circular read.
“Caution was sounded earlier but it did not have any impact on the management or officials of the 13 cooperative banks in West Bengal. So, we will identify the officials responsible and take action,” the RBI official added.
Recently, West Bengal Infrastructure Development Finance Corporation and West Bengal State Cooperative Bank became victims of forgery to the tune of Rs. 120 crore and Rs. 20 crore respectively. In both the cases, fake accounts held in UCO Bank were used to facilitate the fraud.

RBI approves merger of Mehsana Urban co-op bank and Surat Nagrik Sahkari bank

Melvyn Thomas wrote in the Times of India (April 26) :


SURAT : The Reserve Bank of India (RBI) has approved the merger of the Surat Nagrik Shahkari Bank with the Mehsana Urban Cooperative Bank, giving a big succor to the 44000 account holders and depositors in the city.
The account holders and depositors of Surat Nagrik Sahkari bank were on the tenterhooks after the bank was placed under directions by the RBI under section 25(a) of the Banking Regulation Act, 1949 on March 1.
Samir Patchigar, managing director of Surat Nagrik Sahkari Bank said, "We are grateful to the RBI for taking prompt decision on our bank's merger with the Mehsana Urban Cooperative Bank. This will end the 40 long years of Surat Nagrik bank's performance in the city. Now, the depositors and account holders will be catered by the Mehsana Urban bank"


"We were making all our efforts for getting the approval from the RBI regarding the merger of both the cooperative banks. It was only after the NoC was issued by the state registrar of banks that our merger procedure was completed at the earliest" added Patchigar.
Sources said that the Surat Nagrik Cooperative Bank had lost a whopping Rs 25 crore in the Madhavpura bank and Home Trade scams.

RBI may suspend licence of Amanath Bank

The fate of thousands of small-time investors and savings bank account holders is uncertain as the Indian banking regulators started tightening its noose around minority cooperative society Amanath Bank.
Now, the bank is staring a possible suspension of its licence by Reserve Bank of India (RBI) in the face.
Amidst the allegations is Union Minister for Minority Affairs K Rahman Khan, who was one of the founders of the bank, also served as its president when irregularities allegedly took place.
Khan and his associates are alleged to have siphoned off over `110 crore from the bank on the pretext of giving loans to close relatives of the minister. Sources told Express that the bank gave away loans to Khan’s relatives, but they were not recovered.
“Many of them did not pay interest and the board approved closing the loans with a fraction of payment. This resulted in enormous non-performing assets (NPA),” they said. However, Khan admitted that loans were given to his relatives, who defaulted, but he stopped short of taking responsibility for it.
“There are no loans pending from my side. As per co-operative regulations, directors and relatives can take loans... My relatives have taken loans because they are shareholders of the bank and have the right to borrow,” Khan told Express.
“I have not given any concessions, they were given by subsequent boards as part of recovery process. (State Minorities Commission Chairman Anwar) Manpaddy and others are complicating the situation unnecessarily,” he said.
The RBI which is said to have taken note of the ‘dubious’ transactions over a period of time had shut down operations of the bank, allowing only `1,000 transaction per account for a period of six months.
Unaware of this development, small investors and customers are now making frequent trips to the bank to see if they have access to their savings of many years. Sources said the bank had provided insurance of up to `1 lakh and any one with savings more than that amount was likely to be affected if the RBI decided to shut operations.
Amjad Khan, who runs a military equipment store in Shivaji Nagar, says, “We (neighbours) all have invested in the bank and run our families with the interest amount. Now we hear it will be merged and that this crisis is politically motivated, but what about the normal people like us?” The bank’s NPA is said to be around 3 per cent now, but sources said this was fabricated to mislead the RBI and the investors.

news from : www.newindianexpress.com

Shree Ganesh Sahakari Bank under RBI direction

The Reserve Bank of India has placed Shree Ganesh Sahakari Bank Ltd., Nashik, Maharashtra, under Directions. According to the Directions, depositors will be allowed to withdraw a sum not exceeding Rupees one thousand of the total balance held in every savings bank or current account or any other deposit account.
The Urban cooperative Bank will, without prior approval in writing from the Reserve Bank, also not be able to grant or renew any loans and advances, make any investment, incur any liability.
It also cannot enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI Directions dated April 01, 2013.
The Directions have been issued from the close of business on April 02, 2013.
The Reserve Bank has, however, clarified, that issue of the Directions by the Reserve Bank should not per se be construed as cancellation of banking licence. Rather, Shree Ganesh Sahakari Bank Ltd. will continue to undertake banking business but with restrictions till its financial position improves.
The Reserve Bank may consider modifications of these Directions depending upon circumstances.

News from : www.indiancooperative.com

Gujarat Mercantile Co-op bank penalized

Reserve Bank of India penalized Gujarat Mercantile Co-operative Bank based Ahmedabad in Gujarat a couple of days ago.
The apex bank imposed a monetary penalty of Rupees two lakh on Gujarat Mercantile Co-operative Bank for violation of the Banking Regulation Act, 1949 (AACS). It was also found flouting RBI directives.
The Urban Cooperative Bank failed to comply with RBI’s instructions relating to prohibition of loans and advances to directors/ relatives/related concerns.

RBI has issued Show Cause Notice to the bank in the response to which the bank has submitted a written reply and after considering facts of the case, bank’s reply and personal submission in the matter, RBI came to the conclusion that the violations were sustained and warranted imposition of penalty.

News from : www.indiancooperative.com

District co-op banks told to introduce core banking

PUNE: The National Bank for Agriculture and Rural Development (Nabard) has asked all district central cooperative (DCC) banks to get approvals from their board of directors to introduce practices like the core banking system, which are required to launch RuPay-enabled debit cards.
A Nabard official said, "Initially, all DCC banks will have to implement the core banking system, wherein information of all accounts will be available on the bank's intranet, so that basic transactions can be carried out at any branch. This technology is successfully used in all private and public sector banks in the country. Some urban cooperative banks have also implemented this technology."
Once core banking comes into effect, services such as debit cards, ATM withdrawals and online transactions can be made available to customers. DCC banks, which mostly have farmers as their account-holders, do not provide these services yet.
The Nabard had invited representatives of the 31 DCC banks in the state for a meeting in Pune. The banks were asked to shift to core banking and train their employees in the system. The banks will have to bear the expenses to introduce the new system and these will have to be approved by the respective boards of directors.
Nabard officials said core banking would bring all DCC bank accounts onto a common platform, which already has account details from all private and public sector and urban cooperative banks. This platform is supported by the National Payment Corporation of India with the RuPay technology, which offers flexibility and nationwide accessibility to account holders while withdrawing money or making payments using debit cards.
The RuPay-enabled debit cards promoted for farmers by Nabard will subsequently have national accessibility, making it possible for farmers to withdraw or pay money anywhere in the country. Currently, farmers are forced to carry cash with them. People from urban areas also face similar problems when they travel to remote areas.
Besides RuPay cards, more ATMs will also be set up in rural areas. The Union government has encouraged banks and private players to open ATMs in rural areas, Nabard officials said.

RBI to urban co-operative banks: Grant unsecured loans up to 25 per cent of assests

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/UBD030413PCBCIR.pdf

Tension as RBI does a Cyprus on Amanath Cooperative Bank

The Amanath Cooperative Bank here is once again in the news for wrong reasons as the Reserve Bank of India (RBI) has issued a notice curtailing transactions, which led to incensed customers arguing with bank staff here on Saturday.

According to the RBI directive, the bank can conduct a financial transaction of not more than Rs. 1,000 per account a day. Besides, the bank has been stopped from accepting deposits till further orders.

Chaos on premises

Chaos prevailed as hundreds of customers thronged the bank’s head office in Shivajinagar and roughed up the employees to vent their anger. The employees initially tried to pacify them citing a technical snag but the account holders created a ruckus after they came to know about the RBI directive restricting transactions and blocking deposits.

The Shivajinagar police rushed to the spot and managed to bring some order. Later, police officials convened a meeting with the senior bank executives and the account holders, who were assured that the matter would be resolved by Monday.

“There are thousands of account holders from the minority community who have deposited money in the bank besides having their salary accounts. But right from the inception, the bank has been mired in controversy and we are always worried about our money,” said Mustaq Ahmed, an account holder, who was part of the protest on Saturday.

‘Shocked’

Meanwhile, the bank’s chief executive officer Naseer Ahmed told The Hindu he was shocked by the RBI’s sudden decision.

“How can it take such a decision? Soon after formation of the new committee, we are doing well and have recovered over Rs. 7 crore from defaulters and reduced the non-performing assets (NPAs). We have also set a target of recovering dues of Rs. 20 crore by June this year to achieve our target.”

The RBI, which is monitoring the bank’s financial activities, has not considered this year’s activities before taking such drastic steps, he said. “We have brought it to the notice of Urban Cooperative Bank officials and the Registrar of Cooperative Societies, seeking their help to lift the RBI restriction. A meeting has also been scheduled with RBI officials on Monday and we hope that everything will be normalised.” 

News from : www.thehindu.com