RBI Comes To Axis Bank’s Defense After Alleged Irregularities In Cash Exchange
Axis Bank puts preventive measures in place even as agencies investigate money laundering
In a rare communication pertaining to an individual bank, the Reserve Bank of India on Monday denied that it has initiated any action to cancel the banking licence of Axis Bank Ltd.
The denial, which followed a similar clarification issued by the bank on Monday morning, came in response to a report in a Hindi daily called ‘Dopahar’. The report suggested that the bank could potentially lose its banking licence following allegations of irregularities in exchange of old currency notes of Rs 500 and Rs 1000.
The Reserve Bank of India today clarified that it has not initiated any action to cancel the banking licence of Axis Bank in the wake of certain allegations about some serious irregularities in transactions relating to deposit/exchange of Specified Bank Notes in a few branches of the bank.Reserve Bank of India Statement
Earlier in the day, shares of the bank slumped to close 2.5 percent lower on the BSE. The Enforcement Directorate (ED) has arrested atleast three bank officers in connection with alleged illegal exchange of old notes conducted at some of the bank’s branches.
According to a PTI report dated December 7, irregularities had been found in accounts related to the purchase of gold using demonetised notes. The PTI report said that gold had been purchased using old notes and the cash distributed across various accounts opened under the name of shell companies. These funds where then further transferred to accounts of bullion dealers, said the report. BloombergQuint could not independently confirm the exact nature of irregularities.
In its statement, Axis Bank said that it denies any talk of a threat to its banking licence and added that the bank has strong systems and controls in place.
We take this opportunity to assure customers, investors, members of the public that the bank has a strong code of conduct with zero tolerance to any deviations from prescribed processes.Axis Bank Statement
Bullion Accounts Frozen
Meanwhile. the bank, which is also the country’s second largest bullion importer on a consignment basis, has frozen the accounts of all bullion dealers pending an “enhanced due diligence” exercise, a spokesperson at the bank told BloombergQuint.
The spokesperson said the bank had proactively frozen the accounts of its bullion dealer clients after reports that the laundered money was being used to buy bullion. Though orders for bullion have been placed, no bullion has yet been received by the bank, so the money has not gone out of the system, the spokesperson said.
The enhanced due diligence is expected to be completed over the next few days.
The bank believes the number of accounts is small. The spokesperson said that Axis Bank has highlighted 44 suspicious transaction reports (STRs), and this is the number that is being reported as “fake” accounts. By law, all banks must submit reports of suspicious transactions to the financial intelligence unit of the Ministry of Finance, Government of India.
Karnal Singh, the head of the Enforcement Directorate refused to comment on the issue, saying the agency does not release information on ongoing investigations.
