RBI to probe gold coin sales, wealth management at banks

The Reserve Bank of India has widened its probe of Axis Bank, ICICI Bank and HDFC Bank to include wealth management and sale of gold coins of all active banks, a move that may lead to stricter guidelines on these activities if any loopholes are found.

MUMBAI: The Reserve Bank of India has widened its probe of Axis BankBSE 0.23 %, ICICI BankBSE 1.79 % and HDFC BankBSE -0.78 % to includewealth management and sale of gold coins of all active banks, a move that may lead to stricter guidelines on these activities if any loopholes are found.

"The Reserve Bank has undertaken a thematic study in respect of banks that are active in selling gold coins, wealth management products to examine whether there are systemic issues and to plug deficiencies and legal loopholes, if any," the central bank said in a statement.

RBI has also begun "comprehensive scrutinies covering both head office and branches of three private sector banks", whose employees were exposed in a stingoperation advising clients to launder money, it said. Private sector bank staff’s business practices are in focus after online news magazine Cobrapost.com showed staff at Axis, ICICI and HDFC Banks as eager to help clients avoid tax, or convert black money into accounted funds.

The banks themselves, RBI and even the Income TaxDepartment are investigating the expose done by the portal. "This was expected. We were expecting the RBI officials to conduct an audit of the bank," said an official who did not wish to be named.

"The officials want to ascertain and verify if any suspicious transaction has gone through." RBI had last week called for the video clips from the sting operation showing the staff at these banks promoting tax evasion.

"No transaction seems to have been put through. However, the financial advice by some of the bank officials could put these banks in trouble," said a central banker. "The audit is on and we will review the know-your-customer, or KYC, norms followed at these bank branches. If any lapse is found, we reserve the right to take action or penalise the branch. We will also wait for the internal report of these banks," said the official who did not wish to be named.

Cross-selling of third party products such as insurance and mutual funds by an agent from its premises will be the responsibility of the bank, the official said, adding that any mis-selling of these products by third-party agents will be considered the responsibility of the bank and viewed with great seriousness.

In 2006, RBI had fined 17 banks for violation of regulations of KYC norms, breach of prudent banking practices and for not adhering to guidelines related to loans against shares and initial public offering.