Posts Tagged ‘Reserve Bank of India’
Co operative banks which were started to help the local poor have now graduated into laundering Big money.
The RBI has investigated and found that they were at the centre of the Home Trade scam too in 2001 Rs600 crore were found to have been swindled from more than 25 cooperative banks —13 of them in Maharashtra and 12 in Gujarat….
‘While the banking secretary announced last evening that action will be taken against the three private sector banks that were caught laundering money in the Cobrapost sting operation, Moneylife has learnt from banking sources that the trail of the moneylaundering investigation is leading up to a large number of cooperative banks across the country, who first accept cash and introduce it into the banking system.
Banking sources tell us that scores of cooperative banks have been found literally acting as a back-office for initiating the conversion from black money to white money. They happily accept fake PAN cards and dodge detection by opening hundreds of accounts without proper KYC with each deposit carefully under Rs50,000. The money is then transferred to the larger private banks, through a prior arrangement, allowing these ‘successful’ Indian private banks to maintain a clean image.”..
In the 1992securities scam Mercantile Cooperative and Bank of Karad were found to be involved in issuing false securities and had to be closed down. Then too, multi-national banks such as Standard Chartered systematically ensured that fake Banking Receipts (BRs) were passed through the smaller banks, in order to protect themselves. However, they were caught when the multi-disciplinary Janakiraman Committee began to investigate their actions with a fine-tooth comb. Again in the scam of 2000, Ketan Parekh was found to have used Madhavpura Cooperative Bank as his own personal property in diverting cash Rs800 crore to support his speculative positions. The bank has collapsed causing losses to tens of thousand ordinary depositors and other banks.”
The irony is that the same RBI, which confirmed the fraud,gave a clean chit to about 30 Banks by 30/4.2013!
The Reserve Bank of India’s (RBI’s) repeated assertion that it has found no evidence of money laundering in its inspection of three private banks, even before its inspection report is complete, has caused outrage.
However, what is not clear is whether this refers only to the three banks that were targeted by the Cobrapost sting or covers all the 30-odd banks and their tentacles into the poorly regulated cooperative banking sector all over India.
One bank has claims that a forensic investigation has given it a clean chit.
But numerous whistleblowers, hopeful that RBI is serious about unearthing dubious business practices, have been forwarding details to central bank inspectors.
Whistle -blowers confirmed this to MoneyLife.But numerous whistleblowers, hopeful that RBI is serious about unearthing dubious business practices, have been forwarding details to central bank inspectors.
At least two such messages have also been forwarded to Moneylife and we believe that RBI has launched an investigation into the linkages with cooperative banks only on the basis of such confidential information. The second discovery is the massive mis-selling of third-party financial products, including insurance, derivatives and portfolio management without formal approval from SEBI. This includes dumping expensive insurance policies on home loan seekers by making it mandatory. Here is some feedback obtained by Moneylife through whistleblowers and bankers.
Some cooperative banks are freely permitting significant cash deposits and withdrawals, which are probably not being reported to the financial intelligence unit (FIU) in the finance ministry, as required under money laundering rules. Or, if they are reported in a perfunctory manner, there is no evidence that the FIU either notices or acts on the information.
In one case, a whistleblower has shown us documentary proof of a dummy account (the account-holder is a drunkard who apparently lent his name for a small price and even signed blank cheques to permit withdrawal of cash) opened with a cash deposit of Rs5,000. Within days, the bank permitted large cheques of Rs15 lakh+, totalling up to Rs80 lakh, being deposited and withdrawn in cash within three days.”
We often come across problems while transacting .
RBI has issued separate Guidelines on this and has provided an Ombudsman to address such issues.
What is the Banking Ombudsman Scheme?
The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.
2. Who is a Banking Ombudsman?
The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
3. How many Banking Ombudsmen have been appointed and where are they located?
As on date, fifteen Banking Ombudsmen have been appointed with their offices located mostly in state capitals. The addresses and contact details of the Banking Ombudsman offices have been provided in the annex.
4. Which are the banks covered under the Banking Ombudsman Scheme, 2006?
5. What are the grounds of complaints?
The Banking Ombudsman can receive and consider any complaint relating to the following deficiency in banking services (including internet banking):
- non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.;
- non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;
- non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;
- non-payment or delay in payment of inward remittances ;
- failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
- non-adherence to prescribed working hours ;
- failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents;
- delays, non-credit of proceeds to parties accounts, non-payment of deposit or non-observance of the Reserve Bank directives, if any, applicable to rate of interest on deposits in any savings,current or other account maintained with a bank ;
- complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters;
- refusal to open deposit accounts without any valid reason for refusal;
- levying of charges without adequate prior notice to the customer;
- non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations;
- non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of the bank concerned, but not with regard to its employees);
- refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;
- refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;
- forced closure of deposit accounts without due notice or without sufficient reason;
- refusal to close or delay in closing the accounts;
- non-adherence to the fair practices code as adopted by the bank or non-adherence to the provisions of the Code of Bank s Commitments to Customers issued by Banking Codes and Standards Board of India and as adopted by the bank ;
- non-observance of Reserve Bank guidelines on engagement of recovery agents by banks; and
- any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.
A customer can also lodge a complaint on the following grounds of deficiency in service with respect to loans and advances
- non-observance of Reserve Bank Directives on interest rates;
- delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications;
- non-acceptance of application for loans without furnishing valid reasons to the applicant; and
- non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers, as the case may be;
- non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time.
- The Banking Ombudsman may also deal with such other matter as may be specified by the Reserve Bank from time to time.
6. When can one file a complaint?
One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of one month after the bank concerned has received one s representation, or the bank rejects the complaint, or if the complainant is not satisfied with the reply given by the bank.
7. When will one s complaint not be considered by the Ombudsman ?
One s complaint will not be considered if:
a. One has not approached his bank for redressal of his grievance first.
b. One has not made the complaint within one year from the date one has received the reply of the bank or if no reply is received if it is more than one year and one month from the date of representation to the bank.
c. The subject matter of the complaint is pending for disposal / has already been dealt with at any other forum like court of law, consumer court etc.
d. Frivolous or vexatious.
e. The institution complained against is not covered under the scheme.
f. The subject matter of the complaint is not within the ambit of the Banking Ombudsman.
g. If the complaint is for the same subject matter that was settled through the office of the Banking Ombudsman in any previous proceedings.
8. What is the procedure for filing the complaint before the Banking Ombudsman?
One can file a complaint with the Banking Ombudsman simply by writing on a plain paper. One can also file it online (at “click here to go to Banking Ombudsman scheme” or by sending an email to the Banking Ombudsman. There is a form along with details of the scheme in our website.However, it is not necessary to use this format.
9. Where can one lodge his/her complaint?
One may lodge his/ her complaint at the office of the Banking Ombudsman under whose jurisdiction, the bank branch complained against is situated.
For complaints relating to credit cards and other types of services with centralized operations, complaints may be filed before the Banking Ombudsman within whose territorial jurisdiction the billing address of the customer is located.
Address and area of operation of the banking ombudsmen are provided in the annex.
10.Can a complaint be filed by one s authorized representative?
Yes. The complainant can be filed by one s authorized representative (other than an advocate).
- PPI complaints reach ‘unprecedented’ levels (metro.co.uk)
On the joyous occasion of The Indian Government winning the vote in Parliament on FDI in Retail Trade, I have great pleasure in informing my readers how Wal-Mart broke the Law even before entering Indian Market.
The exclusive story by Reuters explains how Wal-Mart surreptitiously entered India and how it lobbied.
Story by Reuters:
The company, called Cedar Support Services, might have been a more obvious selection four months earlier: it began its corporate life as Bharti Retail Holdings Ltd, according to documents filed with India’s Registrar of Companies.
The Cedar investment is now the focus of an investigation by India’s financial crimes watchdog into whether Wal-Mart broke foreign direct investment rules by putting money into a retailer before the government threw open the sector to global players.
Wal-Mart said it was in compliance with India’s FDI guidelines, and had followed all procedures. It said the central government had sought “information and clarification”, which Wal-Mart has provided.
However, several lawyers said the transaction appeared to violate at least the spirit of India’s long-standing ban on foreign investment in supermarkets, which it only lifted in September 2012. When Wal-Mart made the investment in 2010, it was legal for foreigners to own consultants but not retailers, so the shift in Cedar’s business description raised eyebrows.
“This is a complete camouflage,” said Hitesh Jain, a senior partner at ALMT Legal in Mumbai who advises retailers but is not involved with Wal-Mart. “It can be looked at as a violation of FDI rules because Cedar also operates supermarkets, which was a restricted sector back then.”
Graphic on Wal-Mart’s investment link.reuters.com/myp44t
Graphic on India’s retail market r.reuters.com/cuh79s
The law, however, is murky.
Others stressed that the way Wal-Mart structured the transaction might make it legal. According to the documents filed with India’s registrar, the investment was in the form of debt that was convertible into equity. That clouds the issue of whether Wal-Mart took a stake in Cedar or provided financing.
Bharti and Wal-Mart both declined to provide additional details on how the transaction was structured.
Senior government officials told Reuters that the RBI had asked the Enforcement Directorate, which investigates financial crimes, to look into whether Wal-Mart violated the law by investing in a supermarket retailer before foreign investment rules were relaxed.
If Wal-Mart did break the law, it could face a penalty of up to three times its initial $100 million investment, they said.
That would not only be a setback for Wal-Mart, it would also weaken consensus-building efforts by India’s minority government, led by the Congress party. The party is desperate for more support from across the political spectrum after its decision to let foreign players into India’s retail market came under fire from the opposition and even some of its own allies.
Wal-Mart and other retailers lobbied for years to gain access to India’s market, lured by the promise of a middle class that will one day rival China’s. But local opposition has been fierce because of concern that Wal-Mart and its peers will knock millions of mom-and-pop stores out of business.
Reuters pieced together details of Wal-Mart’s investment in Cedar by examining records from India’s Registrar of Companies and through interviews with government officials involved with the matter, as well as several lawyers who work with retailers.
The documents reveal a web of companies set up under the Bharti umbrella, which runs India’s largest telecom operator, Bharti Airtel (BRTI.NS). The group, which also has retail interests, signed a joint venture with Wal-Mart to run wholesale stores in 2007, shortly after India allowed full foreign ownership of wholesale retail operations.
That same year, the Bharti group formed Bharti Retail Holdings Ltd, which in turn owned a subsidiary called Bharti Retail Ltd which operated supermarkets and hypermarkets.
In December 2009, Bharti Retail Holdings changed its business description to consulting services from retail, the documents filed with India’s Registrar show. A month later, the company changed its name to Cedar.
The timing of the change in name and business is significant because when Wal-Mart invested in Cedar in March 2010, foreign companies could legally own 100 percent of an Indian consulting firm but not a supermarket retailer.
Cedar issued “compulsorily convertible debentures” to Wal-Mart Mauritius Holdings Co Ltd, which would be exchanged for 49 percent equity 18 months after the issue date. The conversion date has since been pushed back twice, to September 2013, which would be after India’s relaxation of rules on retail investment.
Cedar’s cash flow statement for 2010 shows that the funds raised from the debentures were used to finance activities and an attached schedule to the balance sheet shows a transfer of 1.75 billion rupees to its retail unit, raising questions over whether Wal-Mart’s money went into the retail business.
M.P. Achuthan, a communist member of India’s parliament, has accused Wal-Mart of breaking the foreign direct investment law and said he wanted the company to be penalised. Achuthan also wants India to scrap its foreign retail investment policy.
“I am surprised and shocked that the government didn’t see this. This kind of an investment could not have happened without the government’s knowledge,” Achuthan said. “It is impossible.”
Wal-Mart’s Indian partner, Bharti Enterprises, said it had followed the rules but did not address specific questions emailed by Reuters.
“We are in complete compliance of all regulations. All details have been shared with the relevant authorities,” a Bharti Enterprises spokesman said.
Two senior government officials said there had been an initial round of communication between the Reserve Bank of India and the Enforcement Directorate. The RBI asked the law enforcement agency to conduct the investigation.
“RBI believes there is a need to investigate,” said a senior government official, who spoke on condition of anonymity because of the sensitivity of the matter. He said both Wal-Mart and Bharti were being investigated because “Wal-Mart allegedly made the investment and Bharti allegedly received it”.
Separately, Wal-Mart said last month it was looking into bribery allegations in several countries including India, Brazil and China. It conducted an earlier probe in Mexico.
DEBT OR EQUITY?
Prime Minister Manmohan Singh is under intense pressure to roll back the decision to permit foreign retailers. Parliament ground to a halt on November 22 over opposition to the reforms until the government agreed to a vote, set for Wednesday.
A year ago, political pressure forced the government to make a U-turn after it first approved foreign investment into supermarkets, an abrupt shift that brought into question India’s ability to build consensus behind long-awaited reforms.
When Wal-Mart made the investment in Cedar in 2010, Indian law permitted foreigners to own “cash-and-carry” wholesale stores, but they were barred from owning what India calls multi-brand retailers, or stores like Wal-Mart’s namesake supermarkets that sell a wide array of products and brands.
Whether the investment in Cedar violated India’s law depends on two issues, according to the lawyers: if Cedar was in fact a retailer rather than a consultancy, and how the investment was structured.
Cedar’s articles of association filed with the Registrar show it called itself a consultancy, but a few pages later it describes a “competing business” as one involved in retail and operates supermarkets, hypermarkets and discount stores.
Even if investigators determine Cedar was a retailer, lawyers said Wal-Mart’s investment may still be legal if the transaction is deemed to be debt. Wal-Mart could then argue that it did not acquire a stake but instead extended a loan.
But according to RBI guidelines set in 2007, compulsorily convertible debentures are considered equity. That would mean Wal-Mart jumped the gun, said Alok Dhir, managing partner Dhir & Dhir Associates.
Dhir said there may be one way around that problem. If Wal-Mart and Bharti included a “put” option on the debentures, it could be considered debt because Wal-Mart would no longer be required to convert the debt to equity.
It is not clear whether this transaction included such a clause, and Wal-Mart and Bharti declined to comment.
Does the name Bharti ring abell?
‘State Bank of India (SBI), the country’s largest lender, came out with an advertisement in all major national dailies on 5 November, stating that it will issue a new set of cheque book to its customers and that the existing cheque leaves will not be valid after 31 December 2012.
“Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project undertaken by the Reserve Bank of India – RBI, for faster clearing of cheques. CTS is basically an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point en-route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.
Cheque truncation, would eliminate the need to move the physical instruments across branches, except in exceptional circumstances. This would result in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc., thus speeding up the process of collection or realization of cheques.
What exactly does Ramdev want?
On Friday, the government released a six-page document of compromises it has reached with Baba Ramdev on the issue of illegal money. It answers accusations that the government went out of the way to placate him. The document also shows that the government does not have contempt for the issues Ramdev has raised.
The document shows that the government has readily accepted Ramdev’s demand to bring a Public Services Delivery Bill in Parliament at the earliest. It is also .We are ready to declare black money stashed abroad as national wealth, says HRD Minister Kapil Sibal.
RAMDEV ANNOUNCES VICTORY
Govt to declare black money as national wealth.
Action Taken by Government on Demands Raised by Baba Ramdev Recovery of Black Money There is a legal framework regulated by the Reserve Bank of India for the opening of bank accounts overseas by Indian residents and for outward or inward remission of funds through authorized channels. The existing legal framework for dealing with illicitly generated funds transferred overseas and measures for the attachment and repatriation of such illegal assets to India and provision for penalties for offenders are: A. Under the Prevention of Money Laundering Act, 2002 (PMLA), money laundered out of predicate scheduled offences can be attached and seized and individuals and other legal entities found to have indulged in money laundering can be prosecuted. PMLA provides for imprisonment of minimum of 3 years (which can be extended up to 7 years) and a fine of up to Rs.5 lakh and the tainted proceeds parked overseas can be recovered through Mutual Legal Assistance Treaties. India has such treaties with 26 countries. B. Under the Foreign Exchange Management Act, 1999 (FEMA), cases relating to contravention in foreign exchange transactions by Indian residents can be adjudicated with penalty up to a maximum of 3 times the amount involved. Further, FEMA empowers the confiscation of the amounts lying abroad and directing their repatriation. C. Under both statutes (FEMA and PMLA), investigation is taken up against specific persons, both natural and legal, and on the basis of specific information. D. Section 105A of the Cr. PC provides for reciprocal arrangement and procedure for attachment and forfeiture of properties generated from the commission of an offence. Where such properties are situated overseas and treaty arrangements exist between Government of India and the other country, Letter Rogatories can be issued to a court / authority of the other country for execution of such an order. E. Under the Income Tax Act also, income earned and not disclosed is taxable and also subject to penalty and interest, as well as prosecution. The amount recovered may even exceed the entire undisclosed income. This is in effect confiscation of such income / property. Actions at hand I. India has negotiated / renegotiated Double Tax Avoidance Agreements and finalized Tax Information Exchange Agreements with 44 countries so as to strengthen the exchange of information relating to tax evasion, money laundering and other criminal / illicit activities. II. Agencies enforcing these laws have been strengthened and action is being taken in all cases where credible information is available. In the last two years, over Rs 33,000 crore of mispricing has been detected in international trade and over Rs 30,000 crore of tax evasion detected domestically. III. Government has commissioned a study, to be completed within 18 months, by three nationallevel institutes to assess the extent of black money inside and outside the country and its impact on national security. The study will also indicate the sectors and mode of generation of black money and recommend measures for its prevention and control. IV. The Direct Taxes Code Bill, as introduced in Parliament, contains provisions for mandatory declaration of assets held abroad by taxpayers in India. It also contains provisions such as General Anti Avoidance and Thin Capitalization Rules to combat illicit transfer of money and assets abroad through complex financial arrangements and instruments. V. A Directorate of Criminal Investigation has been created in the Central Board of Direct Taxes as a dedicated unit to track financial transactions relating to illegal / criminal activities and bring such activities to justice. VI. A High Level Committee has been constituted under the Revenue Secretary for effective sharing of information among Law Enforcement Agencies for coordinated investigation / prosecution of economic offences. Mauritius Treaty 1. A Joint Working Group (JWG) was constituted in 2006 for the purpose of renegotiating the Direct Taxation Avoidance Convention with Mauritius and its last meeting was held in 2008. Thereafter, India has successfully used the mechanism of the Peer Review Group (PRG) of the Global Forum for Transparency and Exchange of Information for Tax Purposes – of which India is Vice Chair – to leverage arguments with the Mauritian side to be more open in furnishing tax related information to India. 2. Recently, during the visit of President of Mauritius in end-April, an indication was received that Mauritius would resume the Joint Working Group dialogue on the DTAC. Further, Foreign Minister of Mauritius has conveyed that his government will give a fresh mandate for the resumed negotiations to their experts. This position has been further confirmed by the Prime Minister of Mauritius to the Indian Minister of State for External Affairs on 16th May 2011 during her visit to Mauritius. 3. Hon’ble Supreme Court in the case of Azadi Bachao Andolan Vs Union of India (2003) endorsed the Mauritius route for investments into India for availing of the capital gains tax exemption. Hence, any change in the law relating to Mauritius can only have prospective application and can be in respect of future holdings/accounts/entities in Mauritius. Proposed Action In order to strengthen existing laws relating to black money, the government has constituted a Committee to consult all stakeholders and submit its report within a period of six months. The Committee will examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia, a) Declaring wealth generated illegally as national asset; b) Enacting / amending laws to confiscate and recover such assets; and c) Providing for exemplary punishment against its perpetrators. Any further suggestions in this regard will be duly considered. http://www.tehelka.com/channels/Web_Specials/2011/June/04/images/Gov_Response_to_Baba_Ramdev.pdf