FEMA violation by pvt banks detected

Reserve Bank of India subsequently issues warnings

FEMA violation by pvt banks detected


The RBI detected violation of Foreign Exchange Management Act (FEMA) guidelines relating to import transactions by the HSBC Limited in 2006-07, the Finance Minister Pranab Mukherjee informed the Lok Sabha on Friday.

After detecting the violation of FEMA guidelines the Reserve Bank issued a “letter of displeasure” to the HSBC Limited. The RBI detected in 2008-09 irregular dealings in securities by the ICICI Bank in Hong Kong. As a follow up action the RBI issued a letter of warning to the ICICI Bank.

In 2007-08 the RBI detected violation of its guidelines relating to opening of deposit accounts by the ICICI Bank. Violation of RBI guidelines led to a fictitious account opened by  fraudsters at the ICICI Bank’s Patna branch. Subsequently the Reserve Bank issued “Advisory Note” to the bank, Mukherjee said.  The Reserve Bank after detecting violation of its guidelines by the Centurion Bank of Punjab Limited (CBPL) in 2006-07 imposed a penalty of Rs 15 lakh on the bank. The violation of the RBI guidelines by the CBPL relates to opening of deposit accounts and monitoring of transactions for adherence to “Know Your Customer” (KYC) norms. Besides the RBI detected  failure by the CBPL of internal controls in the Initial Public Offer (IPO) related irregularities.

The Reserve Bank has imposed a penalty of Rs 10 lakh on the SBI Commercial and International (SBICI) Bank Limited (SBICI) on April 25, 2007 for non adherence of KYC norms while dealing with IPO related accounts as well as failure of internal control systems.  Though SBICI Bank Limited is a wholly owned subsidiary of the State Bank of India it functions as a private sector bank.  The Reserve Bank imposed a penalty of Rs 10 lakh on Catholic Syrian Bank Limited on July 25, 2007 for its failure to comply with KYC standards while opening and operating account as sell as failure of internal control machinery in detecting the irregularities.  In 2007-08 the RBI also issued “Letter of Displeasure” to two state-owned banks—Bank of Baroda and Dena Bank—for violation of FEMA guidelines relating to import transactions.

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