In response to allegations made on 13 March 2013 by Cobrapost, an online media firm, the Reserve Bank of India (RBI) announced that it had initiated an investigation covering the head offices and branches of three private sector banks. ICICI Bank, HDFC Bank and Axis Bank are each conducting their own internal inquiries.
Cobrapost had alleged that its pan-Indian undercover investigation, conducted over several months, revealed systematic money laundering of significant sums of black money into the regular banking system, in violation of the Reserve Bank of India Regulations, Foreign Exchange Management Act guidelines, and other regulatory requirements. Some video content and partial transcripts have been uploaded to the internet.
The RBI has set itself an impressively ambitious timetable for the investigation, and expects to deliver final investigation reports by end March 2013, with appropriate action to follow as necessary. Given that the investigation has not yet concluded, it seems somewhat surprising to find the RBI’s Deputy Governor categorically telling reporters on 21 March – just 3 days after the RBI’s investigation was announced, and 8 days after Cobrapost’s allegations were first published – that “there is not a single transaction which has taken place. KYC violations will happen in any system. These are all transactional issues and have nothing to do with money laundering.”
The RBI is also currently undertaking a thematic study in respect of banks involved in selling gold coins and/or wealth management products to examine whether there are systemic issues and potential deficiencies or legal loopholes in the regime.