GOVERNMENT OF INDIA
Ministry of Finance

RAJYA SABHA
UNSTARRED QUESTION NO. 1919
ANSWERED ON AUGUST 27, 2013  

QUESTION
Investment of Banks in Money Laundering
 

1919. SHRI RAJEEV CHANDRASEKHAR 

Will the Minister of  FINANCE be pleased to state: 

(a)   the rationale used by RBI in computing the fines on the banks which were recently found violating anti-money laundering and other norms, following an expose by Cobra post on the issue, bank wise details;

 (b)   whether Government proposes to put measures in place to rationalize the fine/penalty structure so that it is more proportionate with the current earnings and profits of banks; 

(c)    If not, the reasons therefor; 

(d)   whether under the RBI Act, the CEOs of banks are liable for any instances of money laundering or violation of banking norms; and

 (e)   what disincentives and/or legal measures for the Chief Executives does Government propose to take to ensure that money laundering is rooted out from the Indian banking system? 

ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)

 (a): The contravention of any of the directions and instructions issued by Reserve Bank of India (RBI) under the Banking Regulation Act, 1949 is an offence punishable under sub-section (4) of Section 46 of the Banking Regulation Act. In terms of sub-section (1) of Section 47A of the Banking Regulation Act, 1949, if a contravention or default of the nature referred to in sub-section (4) of Section 46 is made by a bank, the Reserve Bank may, inter-alia, impose on such bank, a penalty not exceeding one crore rupees for each of such contravention and a further penalty which may extend to one lakh rupees for every day during which the contravention or default continues.

 The monetary penalties have been imposed on banks in exercise of powers vested in the RBI under the provisions of Section 47(A) (1) (c) read with Section 46(4) (i) of the Banking Regulation Act, 1949.

 (b): The fines and monetary penalties under section 46 and 47A of the Banking Regulation Act, 1949 respectively were substantially increased through the Banking Laws (Amendment Act, 2012 which was brought into force in January, 2013. The objective of the amendments was to establish an effective and dissuasive penalty regime for violations of the provisions of the Banking Regulation Act, 1949.

 (c): In view of the recent amendment to strengthen the regulatory and supervisory powers of RBI by the rationalizing the fine and penalty regime for violations under the Banking Regulation Act, 1949, there is no proposal to further rationalize the fine and penalty regime under the Banking Regulation Act, 1949.

 (d): There is no provision under Reserve Bank of India Act, 1934. 

(e): In view of reply to (d) above, does not arise.