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.”