In the backdrop of recent violations of banking norms by some public sector as well as private banks, RBI Governor D Subbarao believes that penalties for such offences in India amounted to “peanuts” compared to those in the western countries.
Erring banks can face a maximum penalty of Rs one crore in India, he told the news agency, adding that it was upto the lawmakers to decide whether this should be increased.
Barclays was penalised $450 million, he said in a reference to the fine imposed on the British bank last year to settle charges of manipulating key interest rates.
Asked about the recent expose in which officials of these banks were shown purportedly expressing their willingness to indulge in a whole of violations, Subbarao said the RBI planned to take early action against the errant banks.
“What actionIJ I cannot tell you because action on this has to be taken at lower level at the RBI. So it is premature to conclude that the RBI is going soft or harsh on this.
“We got to follow a process. Just because media is investigating today, we can’t say the RBI has to penalise tomorrow otherwise it is soft,” he told the news agency in an interview.
The Governor said that under rule of law, there is a process to be followed and it was being followed.
“After the process comes to a close, which I hope is sooner rather than later. If you believe the penalty has been too soft or too harsh, you have a privilege to make a statement,” he said.
Referring to the special investigation that was done into Cobrapost’s expose on some major private banks, Subbarao said the bank managements were issued show cause notices and action will be taken accordingly.
He said RBI alone cannot check money laundering and banks too cannot ascertain the source of money while taking deposits.
“Is this money laundering, we do not know...We are not saying there is no money laundering. I am saying whether this money laundering has to be investigated by a much bigger process involving much bigger agencies,” Subbarao said.
Does he consider being termed an “inflation warrior” a compliment or criticism, RBI Governor D Subbarao was asked today.
“I do not take that as a compliment,” reacted Subbarao.
But he went on to add that if people had said the Governor and the RBI had got the mix between growth and inflation judiciously and drawn a right balance “I would take it as a compliment”.
Subbarao said if people thought that he was an inflation warrior to imply that he was targeting inflation regardless of all other concerns, then that would be misreading of RBI’s policy calculations. He said if inflation was close to double digit then RBI need to be inflation warriors. “People say that (tight monetary policy) is affecting growth. Possibly it is affecting growth because you cannot bring down inflation without sacrificing some growth he said.