India’s Banking loopholes being studied to curb money laundering

Apr 28, 2016 0

By Nirendra Dev

New Delhi– The government has asked its agencies dealing with economic offences to study the loopholes in the country’s banking laws to prevent ill-gotten money from leaving the country’s shores and facilitate the return of black money stashed away abroad, well informed sources said.

With the quantum of black money held by Indians abroad variously estimated at between $466 billion and $1.4 trillion, the idea is to get a fix on how the network operates so that the government is able to crack the nexus and deliver on its promise of getting back such ill-gotten assets.

“Pervading secrecy, cut-throat competition among private and international banks, along with the organised crime models, have all resulted in giving a boost to money laundering both in India and abroad,” said a government source, requesting anonymity.

“There is also competition. A large number of foreign and private banks operate in secrecy. Then in jurisdictions like Switzerland and Cyprus, dirty money is often pumped in their financial system via organised channels — or even wire-transferred now,” the source told IANS.

“What we also understand is that multiple layers of secrecy in the system helps clients to mask their accounts and transactions. So directives have been issued by the home ministry and the finance ministry to various agencies to study how the system is aiding such offences.”

Among the agencies roped in are the Enforcement Directorate, Serious Fraud Investigation Office, and the related wings of customs and the Reserve Bank of India. Also being studied is: To what extent the secrecy in the banking system is contributing to money laundering, sources said.

Sources explained that such an exercise also became necessary after preliminary reports from the agencies and departments under the finance ministry reported that private banks in large numbers failed to present case studies by themselves about the modus operandi.

“Privacy is at the core of the functioning of private banks. So the government is left with few options when it wants to crack down on leads — also because money laundering involves multiple transactions to disguise the source of funds,” said the source.

Officials said a comprehensive study can also help in understanding how the flow of such money can be curbed, while also equipping banks to themselves have strong anti-money laundering rules for clients, backed by law.

During the latest US visit of Finance Minister Arun Jaitley, coordination and cooperation among various countries to curb money laundering was at the core of his itinerary. Even at the special session of the US on drugs, he dwelt on the nexus between illicit money, drugs and terrorism.

India also wants to give inputs to the Organisation of Economic Cooperation and Development to be able to come up with objective criteria soon to identify jurisdictions that did not cooperate towards a transparent financial system. “Defensive” steps are being considered against them.

The move also comes against the backdrop of the recent global expose of International Consortium of Investigative Journalists (ICIJ) and over 100 global media organisations on off-shore funds of some powerful people globally, based on millions of leaked documents of a Panama law firm.

The team of officers from the Central Board of Direct Taxes’ Financial Intelligence Unit, the board’s Tax Research Unit, and the Reserve Bank of India, is probing the expose about the “Panama Papers” . (IANS)

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India’s Forex reserves rise by $2.53 billion to $355.94 billion

Mar 25, 2016 0

Mumbai– India’s foreign exchange (Forex) reserves increased by $2.53 billion during the week ended March 18, official data showed on Friday.

According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the overall Forex reserves swelled by $2.53 billion to $355.94 billion.

The overall foreign exchange reserves had risen by $2.54 billion to touch $353.40 billion for the week ended March 11.

The foreign currency assets (FCA), which is the largest component of India’s Forex reserves, increased by $2.50 billion to $332.50 billion during the week under review.

During the week ended March 11, the FCA had augmented by $2.52 billion to $329.99 billion.

Apart from the US dollar, the FCA consists of nearly 20-30 percent of other non-US dollar major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves value.

The country’s gold reserves remained stagnant at $19.32 billion.

However, the special drawing rights (SDRs) gained by $12.1 million to $1.49 billion.

For the week ended March 11, the SDRs inched up by $7.2 million to $1.48 billion.

Similarly, the country’s reserve position with the IMF (International Monetary Fund) edged higher by $21.1 million to $2.61 billion.

The reserve position with IMF had gained $12.7 million to $2.59 billion for the week ended March 11.

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Lok Sabha passes Appropriations Bill, Jaitley assures solving banks stress

Mar 14, 2016 0

New Delhi–Lok Sabha on Monday passed the Appropriation Bill, completing the first phase of the budgetary exercise for 2016-17, with Finance Minister Arun Jaitley saying that his government will find a lasting solution to banks’ financial stress by addressing issues at the core of the problem – over-borrowing by long-troubled sectors like steel, sugar, power and highways.

Indian Finance Minister Arun Jaitley

Indian Finance Minister Arun Jaitley

In his reply in the Lok Sabha to the debate on the Union Budget 2016-17, he said banks stress on account of fraud, where defaulters have wilfully declined to repay loans, will be dealt with legally.

“But there are also some other issues due to which non-performing assets (NPAs) have added up in the banking system,” he said, adding that some genuine economic reasons for the delays in repayments to banks were required to be addressed.

In steel, he said, it was dumping by China. In sugar, it was low global prices, while in power, it was indiscriminate moves by some states to sell electricity below cost, forcing distribution companies to resort to borrowing. In highways, it was poor policy implementation that had crippled the sector, Jaitley said.

“But all these are being tackled with appropriate policy action,” he said.

“There is no point in pushing dirt under the carpet and saying the room is clean,” he added.

Jaitley listed the steps taken by his government such as the anti-dumping duty and high minimum import price of steel, high customs duty on sugar and the Uday discoms’ debt restructure package for power utilities.

The NPAs of public sector banks (PSBs) have increased by close to Rs.1 lakh crore in the first nine months of the current fiscal, parliament was told last week.

Jaitley also rejected demands for rollback of 1 percent excise duty on jewellery saying it was in preparation for unveiling of the Goods and Services Tax, which hopefully will “come soon”

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164 chit fund companies under probe for cheating

Mar 12, 2016 0

New Delhi–As many as 164 ponzi, or chit fund, companies are currently being probed by central agencies for duping customers across the country, parliament was told on Friday.

Cases relating to the 164 companies operating ponzi schemes are being investigated by the Serious Fraud Investigation Office (SFIO), Finance Minister Arun Jaitley told the Lok Sabha in a written reply.

He also released a list of firms against which inquiries are in progress.

Jaitley also said the government has taken a number of steps to check cases of corporate frauds and protect interests of the investors in such ponzi schemes.

“Greater application of technology for early and preliminary identification of cases involving frauds through data analysis and usage of forensic tools etc., is being promoted,” he said.

“CBI (Central Bureau of Investigation) probe has been initiated in a large number of cases, many people were prosecuted and arrests made while several promoters continue to be in jails,” he added.

Noting that the Enforcement Directorate (ED) has also attached properties of many promoters under the Prevention of Money Laundering Act (PMLA), the minister said the government has decided to set up a central authority to take proper action against such offenders.

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Five Syndicate Bank officials booked in Rs.1,000 crore scam

Mar 8, 2016 0

New Delhi– The CBI on Tuesday registered a case against five Syndicate Bank officials, a CA, three private people and others on charges of causing a loss of Rs.1,000 crore to the bank by discounting of fake cheques and bills against fake insurance policies and overdraft limits against non-existent policies.

The bank officials have been identified as New Delhi branch’s then general manager Satish Kumar Goel, Jaipur regional office deputy general manager Sanjeev Kumar, Jaipur branch chief manager Deshraj Meena and assistant general managers of Malviya Nagar branch in New Delhi and Jaipur branch Adarsh Manchanda and Awdhesh Tiwari respectively.

Sources said that the fraud was unearthed recently and a Central Bureau of Investigation complaint was made after the suspension of the bank officials.

Goel was recently transferred to the Syndicate Bank’s New Delhi Branch.

The other accused have been identified as chartered accountant Bharat Bamb, a resident of Udaipur, and three Jaipur residents identified as Shankar Khandelwal, Piyush Jain and Vineet Jain.

All of them have been booked by the CBI under charges of criminal conspiracy, using a forged document as genuine, cheating and forgery of Indian Penal Code (IPC) and sections of Prevention of Corruption Act.

“It was alleged that the accused persons in connivance with the bank officials committed a fraud of Rs. 1,000 crore by resorting to discounting of fake cheques and fake inland bills against fake LICs and arranging over-draft limit against non-existent LIC policies,” said CBI spokesperson Devpreet Singh.

He said that the fraud was allegedly committed at Jaipur and Udaipur branch in Rajasthan and Malviya Nagar branch in Delhi.

“It was further alleged that the bank officials of the two branches were colluded with private persons in the crime since 2011. The amount involved in individual transactions ranged from Rs. 40 lakh to Rs.5 crore but majority of them were in the range of Rs.2.5-4 crore,” the official said.

To avoid detection, many of these transactions were nullified from the proceeds of new fraudulent transactions, he added.

“Searches are being conducted at 10 locations including Jaipur, Udaipur and New Delhi which led to recovery of incriminating documents,” the official added.

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Women accounting for 99 percent of microfinance borrowers in India

Mar 8, 2016 0

New Delhi–With women accounting for 99 percent of microfinance borrowers in India, a major change occurring in the financial system is the greater responsiveness of formal banking sector to articulated needs of the population, the government said on Tuesday.

“The culture is changing in India … there is a greater responsiveness to the articulated needs of the people,” Financial Services Secretary Anjuly Chib Duggal said while addressing the South Asia conclave on Financial Inclusion here, organised by the Microfinance Institutions Network (MFIN).

Noting that the recent banking licences granted by the Reserve Bank of India to Bandhan Bank and other small financial institutions, Duggal outlined the future scenario for last-mile reach of finance to the needy.

“We’re looking, in a time span of three to five years, at a hybridisation of delivery points, at high-touch banking institutions, with microfinance institutions being among them,” she said.

The secretary said that borrowers of microfinance, of whom 99 percent are women, are now being referred to as such, and no longer as “beneficiaries”, because they come with concrete business plans.

“We’re looking at realignments in the banking sector, we’re looking at chemists as banking points,” she said, pointing out that a recent banking licence had been granted to a pharmaceutical company.

India is a “cradle of microfinance” with seven out of every 10 borrowers from the country and as many as 32 million borrowers in this category, of whom 99 percent are women, said MIN chief executive Ratna Vishwanathan.Bangladesh comes next with 22 million such borrowers.

She said the conference had deliberately chosen to open on International Women’s Day on Tuesday.

“The regional conference on financial inclusion looks at facilitating cross-learning among stakeholders of South Asia Micro-entreprenaurs Network (SAMN), and explore the role improved access to finance can play in unlocking the economic potential of the region by contributing to job creation, especially by promoting entrepreneurship among the youth and women,” she said.

Duggal described the microfinance culture as one “coming from the heart” that has enabled “opening up the mind to what people can do”.

“Microfinance institutions have given permissions to people, explicit and implicit, especially to traditionally disadvantaged sections like women. This impact has had the effect of motivating other people,” she said.

She cited the example of the Mudra Bank launched late last year to develop entrepreneurship, particularly among the disadvantaged sections.

Mudra, she said, had become a “runaway success” having already disbursed loans of Rs.1,15,000 crore.

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Budget has given RBI space to cut rates

Mar 3, 2016 0

New Delhi–The union budget 2016-17, with the target of holding the next fiscal’s deficit at 3.5 percent of GDP, has given space to the Reserve Bank of India (RBI) to ease interest rates, union Minister of State for Finance Jayant Sinha said on Thursday.

“Macroeconomic stability is fundamental to ensuring that monetary policy has space. If we don’t provide that monetary policy space by generally a tighter fiscal policy, we cannot expect monetary policy to loosen up,” he said at an event here organised by Indian Private Equity and Venture Capital Association.

Jayant Sinha

Jayant Sinha

“So, that is the kind of environment we have tried to create on the macro side.

“There was fiscal consolidation, the current account deficit came down, inflation came down. As that happened, interest rate, which was very high over 10-12 percent, came down quite dramatically,” he added.

Declaring that prudence lies in adhering to fiscal targets, Finance Minister Arun Jaitley, presenting the budget on Monday, retained the much-awaited figure of fiscal deficit for the current financial year at 3.9 percent of GDP, and at 3.5 percent for 2016-17 but added he had also ensured that the development agenda is not compromised.

The fiscal deficit for 2014-15 touched 4.1 percent of the GDP.

Meanwhile, India’s services sector activity fell to a three-month low amidst subdued growth in new orders, key macro-economic data showed on Thursday.

The Nikkei Business Activity index fell to a three-month low of 51.4 in February, from 54.3 in January, adding to expectations of a rate cut by the RBI.

At its sixth and the fiscal’s final bi-monthly monetary policy review last month, RBI kept its key lending rate unchanged at 6.75 percent.

“The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on inflation,” Governor Raghuram Rajan said in his policy statement.

India’s consumer price indexed (CPI), or retail, inflation has been rising. As per data released last month, annual retail inflation moved up further to 5.69 percent in January, from 5.61 percent in the month before.

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Strengthening dollar depletes India’s foreign exchange coffers

Feb 28, 2016 0

Mumbai– A strengthening dollar, coupled with the central bank’s attempts to arrest the fall in the rupee’s value plunged the country’s foreign exchange (Forex) reserves during the week ended February 19, experts said on Saturday.

According to the Reserve Bank of India’s (RBI’s) weekly statistical supplement, the overall Forex reserves declined by $1.46 billion to $350.36 billion.

The foreign reserves had risen by $347.2 million to touch $351.83 billion for the week ended February 12.

Currency analysts, cited revaluation impact as the main reason for the depletion in
foreign exchange coffers.

“The country’s foreign exchange reserves were negatively impacted by a strengthening dollar during the week under review,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

The foreign currency assets (FCA), which is the largest component of India’s Forex reserves, slumped by $1.43 billion to $328.58 billion during the week under review.

Apart from the US dollar, the FCA consists of nearly 20-30 percent of other non-US dollar major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves value.

“The US dollar rallied by more than one percent against major global currencies during the week under review. This receded the foreign exchange reserves,” Banerjee added.

Other currency analysts blamed the central bank’s dollar selling activity to arrest the fall in the rupee’s value for the decline in Forex coffers.

“RBI has been very active. It has been selling US dollars to stem the fall in the rupee’s value,” a currency analyst told IANS from New Delhi.

“It may have even sold more US dollars at the forward and futures market, which are not counted, as part of the official reserves statistics.”

On a weekly basis, the rupee weakened by 23 paise to 68.47 (February 18) against a US dollar from its previous close of 68.23-24 (February 12).

The weakness in India rupee’s value indicated the massive outflow of foreign funds from the equity and debt markets.

National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold Rs.3,307.47 crore or $484.42 million in the equity and debt markets from February 15-18.

Data with stock exchanges disclosed that the FPIs divested stocks worth Rs.2,608.87 crore during the week under review.

Notwithstanding the downward trend, the country’s gold reserves remained stagnant at $17.69 billion for the week ended February 19.

However, the special drawing rights (SDRs) were negatively impacted by currency revaluation as they plummeted by $2.57 billion to $1.48 billion.

Similarly, the currency revaluation impacted the country’s reserve position with the IMF. But unlike SDRs, the impact was positive, which swelled the reserve position by $2.54 billion to $2.59 billion. (IANS)

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Rupee touches 30-month closing low

Feb 22, 2016 0

Mumbai–The Indian rupee weakened by 14 paise on Monday to touch its 30-month closing low.

The rupee closed at 68.60 against the US dollar, at level which was last seen during late August, 2013.

It weakened by 14 paise to 68.60-61 to a US dollar from its previous close of 68.47 to a greenback on Thursday. The domestic currency markets were closed on Friday.

RupeeOn Friday, the rupee crashed to a record low of 68.89 to the US dollar in the oversees currency markets. It ended that day’s trade at 68.72.

“Indian rupee touched a fresh 30-month-low at 68.72 levels on spot, not far from the all time low of 68.85 on spot. It closed at 68.60 to a US dollar,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“However, alleged hand of RBI (Reserve Bank of India) may have saved the rupee from further losses.”

According to Banerjee, the RBI may have been active on exchange traded currency futures.

The weakness in the rupee value indicates the massive outflow of foreign funds from the Indian equity and debt markets.

The foreign institutional investors (FIIs) were net sellers during the day’s trade. Data with stock exchanges showed that FIIs divested Rs.656.93 crore, during the day’s trade.

According to Hemal Doshi, chief currency strategist, Geofin Comtrade, the rupee’s fell on the back of a strengthening US dollar and weak emerging markets (EMs) currencies.

“The dollar strengthened by about 0.75 percent, while all other EM currencies were under pressure in the day’s trade,” Doshi told IANS.

On technical levels, rupee is seen to have a good support at 68.85-30, a closing below this level may start the recovery rally in the Indian currency.

Other currency analysts said that caution over the upcoming budget session, too dragged the rupee’s value lower.

“Rupee was singled out in the day’s trade due to the start of the budget session. Any signs of a washout in the initial few days will dampen sentiments further,” a currency analysts told IANS from New Delhi.

Parliament’s budget session commences on Tuesday.

In addition, the slide in rupee’s value capped gains in the equity indices.

Despite this the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed — higher by 80 points, or 0.34 percent, at 23,788.79 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended the day’s trade mildly in the green. It edged up by 24 points, or 0.33 percent, at 7,234.55 points.

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Currency revaluation swells India’s Forex reserves

Feb 20, 2016 0

Mumbai–Despite a massive decline in India’s reserve position with the International Monetary Fund (IMF), the country’s foreign exchange (Forex) reserves kitty grew by $347 million during the week ended February 12, experts said on Saturday.

According to the Reserve Bank of India’s (RBI’s) weekly statistical supplement, the overall Forex reserves gained by $347.2 million to touch $351.83 billion for the week under review.

The foreign reserves had risen by $2.33 billion to $351.48 billion for the week ended February 5.

Analysts attributed the rise in Forex reserves to the currency revaluation effect and appreciation in the US dollar value.

“The country’s foreign exchange reserves rose by $347.2 million to $351.831 billion in the week to February 12, thanks to revaluation impact from the non dollar part of reserves,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“RBI may have been selling US dollars that week through the forward and futures market, which is not going to be counted as a part of the official reserves statistics.”

The currency revaluation strengthened the foreign currency assets (FCAs) which is the largest component of India’s Forex reserves. It grew by $1.58 billion to $330.01 billion during the week under review.

Apart from the US dollar, the FCAs consist of nearly 20-30 percent of other non-US dollar major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves value.

“US dollar had rallied by around one percent against major global currencies and that may have also contributed to the increase in reserves,” a currency analyst from New Delhi told IANS.

Notwithstanding, the country’s gold reserves remained stagnant. The bullion had risen by $456.6 million to $17.69 billion for the week ended February 5.

The special drawing rights (SDRs) were higher by $21.5 million to $4.06 billion.

However, the country’s reserve position with the IMF plunged by $1.25 billion to $54.2 million.

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