Companies & Sectors
Cobrapost fallout: RBI penalises Axis, HDFC, ICICI banks for rule violations
The penalty follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these three banks at their corporate offices and some branches during March/April 2013
The Reserve Bank of India (RBI) today imposed a fine of Rs5 crore on Axis Bank, Rs4.5 crore on HDFC Bank and Rs1 crore on ICICI Bank for violation of know your customer (KYC) norms and anti-money laundering guidelines after inquiring into charges levelled by a online portal Cobrapost.
“After considering the facts of each case ... Reserve Bank came to conclusion that some of the violations were substantiated and warranted imposition of monetary penalty...” the central bank said in a statement.
The penalty follows scrutiny carried out by RBI of books of accounts, internal control, compliance systems and processes of these three banks at their corporate offices and some branches during March/April 2013.
The scrutiny was conducted to investigate into the allegations of contravention of KYC/anti-money laundering guidelines against them following expose by online portal Cobrapost.
Although the investigation did not reveal any prima facie evidence of money laundering, RBI said, “Any conclusive inference in this regard can be drawn only by an end-to-end investigation of the transactions by tax and enforcement agencies.”
RBI further said that a similar scrutiny was being conducted at corporate offices of 36 other banks and “the process of follow up action in respect of these banks is at different stages of its completion.”
Based on the findings of the scrutiny, the RBI had issued show-cause notices to each of these banks, in response to which the individual banks submitted written replies. 
The penalty, it said, was imposed after considering the facts of each case and individual bank's reply, as also, personal submissions, information submitted and documents furnished. 
The scrutiny of these three banks, RBI said revealed violation of certain regulations and instructions issued by the central bank from time to time. 
The violations include non-observance of certain safeguards in respect of arrangement of “at par” payment of cheques drawn by cooperative banks, non-adherence to certain aspects of KYC and AML guidelines like risk categorisation and periodical review of risk profiling of account holders. 
They did not adhere to the KYC norms for walk in customers for sale of third party products and failed to file cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs50,000. 
In certain cases, the banks failed to obtain permanent account number (PAN) card details or form 60/61 and verify the source of funds credited to a few non-resident ordinary (NRO) accounts. 
RBI had launched the investigation into the working of banks following the expose by Cobrapost which showed some bankers giving suggestions to customers on ways to bypass regulatory norms. 
The first expose had named ICICI Bank, Axis Bank and HDFC Bank. Later scores of other public and private sector banks and insurance companies figured in the expose.



arun adalja

3 years ago

very low penalty considering their mistakes for violating norms prescribed by rbi.these banks must be banned opening new acounts and they must publish apology in all leading newspapers.

RCom and RIL’s $2 billion tower-sharing deal: Positive for both, says Nomura

The deal is positive for both RCom and RIL. RCom can utilize and monetize its extensive network reach. And importantly, it can deliver its balance sheet further (total debt: $7 billion), says Nomura Equity Research

Reliance Communications (RCom) and Reliance Industries (RIL) announced a tower-sharing deal for an “aggregate value” of over $2 billion for 45,000 towers over the lifetime of the agreement, which could be over 10-15 years, according to a report by Nomura Equity Research.


The exact details aren’t available, but according to Nomura this value is predominately for annual leasing revenues, and not the pass-through. Hence, the bottomline impact could be larger than the topline.


Assuming per-tower build cost of $60,000-$70,000 in India, this deal implies RCom is recovering more than 50% of the total build cost of 45,000 towers (ignoring the impact of time value), the brokerage points out.


For RCom, the interest expense in FY13 was Rs25 billion, or $450 million. If RCom collects leasing revenues on all its towers, it should be able to collect around $200mn per annum, as per Nomura’s estimate (45,000 towers @ $600/month rent @ 60% margin, although rentals could arguably be substantially lower than market rates).


According to Nomura, the deal is positive for both RCom and RIL. It further states that RCom can utilize and monetize its extensive network reach (both recently entered into an inter-city fibre sharing deal too). And importantly, it can deliver its balance sheet further (total debt: $7 billion). RIL can also accelerate its wireless/4G rollout.


On RCom, the stock has re-rated significantly year-to-date, largely on news flow so far. Fundamentally, Nomura has always flagged RCom’s extensive network reach in India and internationally, but it has been difficult to ascribe a proper value to it, given high gearing levels and inconsistent execution. “This deal could provide better financial visibility and we will reassess our forecasts pending further analysis,” Nomura said.


“For Indian telcos overall, seeing another viable competitor emerge with extensive coverage, spectrum and capital is hardly good news over the medium term. RIL may or may not be aggressive in the near-term, but the loss of incremental market share for the incumbents becomes a large risk,” Nomura said in its concluding remark.


India’s trade deficit likely rose to a record high in May, says Nomura

The rise is due to a seasonal rise in imports, a surge in gold imports and sluggish exports, the brokerage firm said

India is scheduled to release its May trade data this week. Brokerage firm Nomura expects a record-high trade deficit of $21 billion in May from $17.8 billion in April. Nomura has cited three reasons for this:



First, the trade deficit has historically worsened sharply in May from higher chemical and fertilizer imports. Second, gold demand was elevated in May, as about 162 tonnes of gold were imported in response to falling gold prices. Lastly, external demand has been sluggish.


Nomura expects the trade deficit to improve in June, but the steep rise in April and May suggests that the current account deficit will widen to 5.5%-6% of GDP in Q2 2013 from 4%.-4.5% in Q1. Financing the current account deficit, therefore, remains a concern, and it is also one of the main reasons why the brokerage expects no repo rate cut in June.


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