Banks need better compliance systems: RBI dy governor

13 Jul 2013


Deputy governor of the Reserve Bank of India K C Chakrabarty on Friday emphasised the need for a ''strong compliance culture'' among banks, saying there should be a strong system to rectify breaches of 'know your customer' (KYC) norms.

'''We are not worried that there are certain deviations ... but you must have a system to identify there is something wrong and rectify it immediately,'' Chakrabarty said on the sidelines of an event in Mumbai.

''That part (rectification system) is missing and I think that is one of the reasons why we don't have a strong compliance culture.''

His comments came even as the RBI issued a notification to banks to be more careful about checking the credentials of walk-in customers.

Chakrabarty was speaking in reference to the recent sting operations carried out on banks by a web portal, which seemed to show them 'laundering' money for over the counter customers with large amounts of cash (See: E-magazine 'sting' claims routine money-laundering at 3 banks) 

 ''There is no revelation in that. Their only revelation is that in this country, there is black money and banks are ... actually you don't require a sting operation for that,'' he said.

Nonetheless, several banks, mainly in the private sector, where penalised by RBI only after the scam broke. Chakrabarty said penalties on other banks were under way but refused to give a timeline. (See: RBI fines Axis, ICICI, HDFC Bank for KYC rule violations). 

He said to ensure better compliance with the rules, banks should have a compliance policy, structure, a manual, properly identified people and an internal audit as well.

Chakrabarty said there are at least 54 laws which affect the banking business directly or indirectly. Plus, there are other regulatory compliances, so it is very necessary to have proper compliance.

Compliance, he said, acts like a lubricant which runs the business machinery of a bank.

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