RBI Won't Hesitate To Take Action If KYC Norms Flouted: Deputy Governor Swaminathan
The Reserve Bank of India is focused on plugging gaps in the know-your-customer norms by introducing stringent rules and penalties on banks and lending institutions.
Bank boards should ensure that the know-your-customer guidelines are followed with both precision and empathy, RBI Deputy Governor Swaminathan J has said, amid a rise in complaints about flouting the KYC norms.
Swaminathan urged the bank boards to establish policies and adopt standard operating procedures that are not only compliant with regulatory guidelines but also practical for effective implementation.
"The Reserve Bank will not hesitate to take regulatory or supervisory actions against entities that fail to address these concerns in a timely and considerate manner," he said at a conference of directors of private sector banks in Mumbai on Monday.
While the RBI has comprehensively updated the master directions on KYC in full alignment with the Financial Action Task Force and the Prevention of Money Laundering Act requirements, the way in which the guidelines are being implemented seems to be resulting in a number of accounts getting frozen, denying customers access to their funds, according to Swaminathan.
The central bank's root cause analysis indicates a set of issues, including high pendency at the bank level in periodical updation of KYC details of customers, lack of a proactive approach in assisting and obtaining required documents and inadequate staff deployment in such critical functions resulting in overcrowding or denial of service at branches.
Directing customers to approach their 'home branch' for availing such services rather than being empathetic to customer needs by attending to them at a branch of their convenience and failure to update the details in the system even after the customers have provided the required documents are also the issues that the RBI has highlighted.
"It has also come to our notice that in certain cases the accounts that are meant to receive direct benefit transfers from the government have also been made inoperative or frozen, contrary to regulatory guidelines in the matter," Swaminathan said.
The comments come at a time the Enforcement Directorate raided 23 locations in Maharashtra and Gujarat last week where a large number of bank accounts were allegedly opened through fake documents and KYC.
Recently, the RBI has stepped up its regulatory supervision and is focused on plugging gaps in the KYC norms by introducing stringent rules and penalties on banks and lending institutions.
