There are about 1700 urban cooperative banks in the country and over 480 of them have come under the scanner of the Reserve Bank of India (RBI) for alleged violation of anti-money laundering laws thereby dealing a blow to the issue of their credibility.
The central bank has been taking strict action like imposition of penalty and denial of branch expansion against the erring urban cooperative banks (UCBs), official sources said, quotes PTI.
The RBI has issued instructions to its regional offices to undertake scrutiny of 489 UCBs to ascertain compliance of Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines, they said.
The matter of misuse of UCBs, over which there is dual control by central and state governments, for money laundering has been a matter of concern of central intelligence agencies.RBI has also been coordinating with the state governments on the issue and advised strict action against the defaulting UCBs, they said.
The central bank has also issued guidelines to block accounts of all non complying customers, the sources said. Most of the urban cooperative banks were lax on regulatory issues and were used as conduits for money laundering, they said.
It has been observed that the problem of irregularities in the UCBs is of “grave nature” given their wide reach and penetration across the country with 8,100-plus branches which have huge deposits to the tune of Rs 2.09 lakh crore and advances worth Rs 1.35 lakh crore, according to a report by Central Economic Intelligence Bureau (CEIB).
“The issue also acquires serious proportions because it jeopardises the hard earned money of the public which is put at stake due to non-adherence to the RBI regulations or instructions and also letting the banking channels being abused by unscrupulous people in laundering money which can play havoc with the financial health, safety and security of the country,” the report has said.
Sources said UCBs are inspected annually or once in two years depending on their ratings or classification. About 70 per cent of these urban cooperative banks are subjected to inspection every year. CEIB officials are in touch with RBI and keeping a close watch on any case of suspected money laundering via these banks, they said.
Efforts to contact NAFCUB President M L Abhyankar failed as his phone was out of reach. But earlier in an interview to Indian Cooperative he had said that indeed the issue threatens the very existence of cooperative movement. His bank Cosmos has been able to establish high standards of banking operations and has emerged as leading bank over the years in Pune, he had reminded.
