The recent demonetisation period from November 11. 2016 to December 30, 2016 prescribed for exchange/deposit of the now banned Rs. 500/1000 notes has clearly exposed the extent for everyone to see the rot and greed in some banking officials. Given this, it is shocking to read that the Ministry of Finance has put out a figure of just Rs. 71.5 crores as the amount wherein bank officials have colluded to fraudulently exchange these banned notes. This is obviously a grossly underestimated figure.
As we are now aware, bank officials have used various methods to assist black money hoarders to exchange their ill-gotten gains and sabotage the good intentions of the government –
- Accounts which have not been operated for a year or more were identified by crooked branch officials and these accounts were allowed to be used by black money holders to deposit their hoard of banned notes withdrawing new notes to replace that.
- In the initial days when multiple exchanges of Rs. 4,000 worth of banned notes were allowed, bank officials facilitated photocopies being taken of already submitted photo IDs, without the knowledge of the original ID holder. These photocopies were then put together and used for facilitating bulk exchange of black money.
- Jan Dhan accounts were allowed to be misused to deposit amounts over Rs. 50,000 without any KYC stipulations, often without the knowledge of the account holders. These accounts were used to deposit black money banned notes and withdrawal of new notes.
- Multiple new accounts using the same set of identity documents were facilitated to be opened at branches and these accounts were used to launder black money.
These are just some ways by which the system was misused in collusion with bank branch officials, and even a few RBI officials. Apart from this black money hoarders have also made use of their employees and even random persons who were ready to help them by standing in line for a commission.
All of these methods were widely written about in the press and in social media and banks should have taken note of them and initiated remedial measures as the misuse was happening. Quite obviously RBI was aware given some measures they introduce to stop multiple attempts at exchange and so on.
Banks on their own should have by now come up with what they have done to detect wrongdoing and the action taken. If they haven’t it is either that they are lethargic and uninterested in properly supporting the governments steps to curb black money or they are aiding or protecting their customer and staff, in the bargain facilitating a build-up of black funds again.
Every bank, including cooperative banks, is not fully computerised and has a central database. It is quite easy to get their IT department to run queries on the database to identify not just the accounts and identities that have been misused but also to trace out the particular branch officials who put through the transaction. Based on this information the banks should have already taken action against erring officials. If they have not done this, it is now upto the RBI and Finance Ministry to push them into doing this. A clean up of the banking system is long overdue and the demonetisation exercise gives the government a great opportunity to do this
I am not suggesting that all that is rotten in banks and the banking system will suddenly come to the fore and be eliminated, but a significant part of the rot can be corrected if the government acts quickly now.