Cobrapost expose: ICICI, Axis, HDFC Bank shares flat; but reputation hit

Shares of ICICI Bank , Axis Bank and HDFC Bank were largely unmoved by the Cobrapost.com expose charging these banks with abetting money laundering (making black money legal). Nevertheless, credibility of the private sector lenders could be hurt, more so as these banks had been clocking a consistent growth in profits even in a slowing economy.

ICICI Bank shares were up slightly, while Axis Bank and HDFC Bank shares were marginally down.

The charges, if proved, could put the trio in serious trouble with RBI and the Finance Ministry, since there appears to have been violation of Income Tax Act, FEMA, RBI regulations, KYC norms, the Banking Act and Prevention of Money laundering Act (PMLA).

So far only ICICI Bank has issued a press release, and it has not denied the findings of expose outright.

Also Read - HDFC Bank, ICICI, Axis accused of money laundering

Excerpts from the bank’s release: 

“We are deeply concerned with the media reports. We want to assure our customers and all our other stakeholders that we are committed towards adherence to the high standards of business conduct, which is expected of us. We have constituted a high level inquiry committee to investigate into the matter and submit its findings in 2 weeks.”

Even globally, instances of money laundering by high profile banks are not uncommon. In recent times, HSBC and Standard Chartered paid hundreds of millions of dollars to settle charges of money-laundering activities against them.

Here is an extract from the Cobrapost.com press release on how banks were facilitating customers with black money to legitimize it.

* Accept huge amounts of cash and invest it in insurance products and gold.

* Open an account to route the cash into various investment schemes of the bank.

* Do it even without the mandatory PAN card or adhering to the KYC norms laid down by RBI.

* Split the money into tranches to get it into the banking system without being detected.

* Use ‘benami’ accounts to facilitate the conversion of black money.

* Use accounts of other customers to channelize the black money into the system for a fee.

* Get demand drafts made for the client either from their own banks or from other banks to facilitate investment without it showing up in the client’s account.

* Keep the identity of the investor/depositor secret.

* Open multiple accounts and close them at will to facilitate the investment of black money.

* Invest black money in multiple instruments in the names of different individuals, not necessarily drawn from among the family.

* Allot lockers for the safekeeping of the illegitimate cash, including special large size lockers to accommodate crores of hard cash.

* Personally come to the residence of the client to take the black money deal forward and collect the cash, even bring along counting machine.

* Use provisions like Form 60 to deposit the illegitimate cash into the account to route it into investment.

* Help the client to transfer black money abroad through NRE (Non-Resident External)/NRO (Non-Resident Ordinary) account; transfer the money telegraphically or through means other than regular banking procedures.