Yearender: Sting operations, bad loans hit all from SBI to Yes Bank

Dec 30 2013, 11:59 IST
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Initially, 26 entities evinced interest in entering the banking arena. (AP) Initially, 26 entities evinced interest in entering the banking arena. (AP)
SummaryInitially, 26 entities evinced interest in entering the banking arena.

From the largest lender SBI to the youngest Yes Bank, the nation's banks were fined for violating regulatory norms after sting operations exposed chinks in their armour.

The year 2013 saw the Reserve Bank of India (RBI) nudge banks to not only improve customer services and reduce bad loans but also look at plugging loopholes in the regulatory system ahead of the entry of new banks.

The much-awaited guidelines for new banks were released by the RBI, which will provide licences to some of the 25 applicants in the coming year.

Initially, 26 entities evinced interest in entering the banking arena. Tata Sons, the holding company of the Tata group, withdrew last month, leaving 25 players in the fray. Tata Sons pulled out a couple of months after Venugopal Dhoot's Videocon withdrew its application.

Mahindra & Mahindra, which initially showed interest in entering the sector, didn't apply, citing "disadvantageous" and unclear norms.

Public sector entities India Post and IFCI and the private sector Anil Ambani Group, Aditya Birla group and Bajaj Finserv submitted their applications on July 1.

RBI Governor Raghuram Rajan had said he hopes to announce the new bank licences within, or soon after, the term of Deputy Governor Anand Sinha, which expires next month. Sinha has been shepherding the process.

During the year, allegations of money laundering were levelled by news portal Cobrapost against three leading private sector lenders -- ICICI Bank, HDFC Bank and Axis Bank -- prompting the Reserve Bank to initiate an enquiry.

In its second expose, the portal accused 23 leading banks and insurance firms of "running a nationwide money-laundering racket, blatantly violating laws of the land."

The entities named in the expose included State Bank of India, LIC, Punjab National Bank, Bank of Baroda, Canara Bank, Reliance Life, Tata AIA, Yes Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, Dhanlaxmi Bank, Federal Bank, DCB Bank and Birla Sun Life.

The portal alleged the financial entities offered to open bank accounts and lockers without following Know Your Customer (KYC) norms, convert black money into white and obtain fictitious PAN cards.

After investigations, Rs 49.5 crore of fines were imposed on 22 banks, including SBI, PNB and Yes Bank, for violating KYC or anti-money laundering norms. Cautionary letters were issued to seven, including Citibank and Stanchart.

During the year, banks, especially public sector lenders, continued to grapple with rising non-performing assets (NPAs),

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