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.