Barely over a month ago, a money laundering allegation on India's top private sector by online magazine Cobrapost shook investor confidence. Not that each of the entities enjoyed the reputation of great management quality. But this instance in particular reiterated our doubts on whether private sector banks deserve the premium valuations they enjoy over PSUs. All this while we at least drew solace from the fact that the RBI continues to do a good job of keeping regulatory policies watertight.
But the outcome of the central bank's audit report on the operations of HDFC Bank, Axis Bank and ICICI Bank is disappointing to say the least. Adopting a diplomatic approach, the RBI has cited ‘aberrations' in the operating norms of these banks. It has also denied systemic risks in the sector through the money laundering transactions. What it has not clarified is why the banks managed to circumvent critical KYC norms and how this will be prevented. More so, what should bank managements do to ensure that growth and profit motives are not at the cost of ethical operations.
As if the RBI's lackadaisical approach to this fiasco was not enough, yet another Cobrapost allegation has rubbed salt on the wounds. This time the allegation is that the three private sector banks were not alone in the money making gamble. Several other top PSU banks, other private sector banks and insurance behemoth LIC are all party to it. In fact the allegation names State Bank of India, Punjab National Bank, Bank of Baroda, Reliance Capital and Yes Bank amongst those guilty. The least we can say is that at this rate, not just investors but depositors too could start losing faith in their banks. The earlier the RBI takes a firm stand on this the better!
But the outcome of the central bank's audit report on the operations of HDFC Bank, Axis Bank and ICICI Bank is disappointing to say the least. Adopting a diplomatic approach, the RBI has cited ‘aberrations' in the operating norms of these banks. It has also denied systemic risks in the sector through the money laundering transactions. What it has not clarified is why the banks managed to circumvent critical KYC norms and how this will be prevented. More so, what should bank managements do to ensure that growth and profit motives are not at the cost of ethical operations.
As if the RBI's lackadaisical approach to this fiasco was not enough, yet another Cobrapost allegation has rubbed salt on the wounds. This time the allegation is that the three private sector banks were not alone in the money making gamble. Several other top PSU banks, other private sector banks and insurance behemoth LIC are all party to it. In fact the allegation names State Bank of India, Punjab National Bank, Bank of Baroda, Reliance Capital and Yes Bank amongst those guilty. The least we can say is that at this rate, not just investors but depositors too could start losing faith in their banks. The earlier the RBI takes a firm stand on this the better!
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