Govt in a tizzy after new allegations against banks, insurers

07 May 2013


The government has got into a flurry of action after online news publication Cobrapost, which had exposed irregularities in the dealings of several banks, on Monday turned its focus on public sector banks and financial institutions.

Cobrapost has accused as many as 23 public and private sector banks and insurance companies of ''running a nation-wide money laundering racket'', prompting the finance ministry, banking regulators and banks themselves to initiate separate probes into the matter.

The latest video expos√© by undercover reporters, codenamed by the website as Red Spider Part 2, alleges that several government-owned banks and insurance companies offered to open bank accounts and lockers for customers without following know your customer (KYC) norms, facilitating money laundering. 

Those named in the Cobrapost sting operation include State Bank of India, the Life Insurance Corporation, Punjab National Bank, Bank of Baroda, Canara Bank, Reliance Life, Tata AIG, Yes Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, Dhanlaxmi Bank, Federal Bank, DCB Bank and Birla Sun Life.

The strong response of the authorities lends credence to the Cobrapost expose. The finance ministry has sought the suspension of all officers and employees who ''clearly appear'' to have advocated plans that facilitate money laundering; and taking away the portfolios of all other officers and agents who were associated with such activities.

''The financial services secretary has asked the chairmen-cum-managing directors (CMDs) for detailed reports on utmost priority with the name of the employee/designation and action taken,'' a finance ministry statement said.

The Insurance Regulatory and Development Authority (IRDA) said, ''The insurance companies concerned have been asked to file a report on the allegations. The matter is under examination and appropriate action will be taken at the earliest.''

Reacting to the report, SBI chairman Pratip Chaudhuri said the bank would investigate the matter. ''So far, it does not indicate if KYC violations have occurred. But if they have been done, the people would be severely punished,'' he said.

At the same time, he added that the bank cannot be privy to details of what customers store in their lockers.

Bank of Baroda general manager D D Singla said, ''We are in the process of investigating the whole event. Instances of deviation will be sternly dealt with as per our established procedure.''

Others named by Cobrapost reacted along similar lines.

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