RBI seems to be pursuing the issue of money laundering seriously. The latest news is that a big cat is out of the bag :the small dhobis are doing the washing for the big brand laundries. Confused ? What I mean is the big brand private and public banks are using small cooperative banks across the country to convert black money into white money.
They accept fake PAN cards and open numerous savings accounts without proper KYC, each deposit carefully kept below Rs 50,000; the money is then transferred to the big banks for onward investment through perfectly “white” channels.
But there the trail could come to a dead end. Does RBI or the government have the will to get the dirty linen into the open and book the guilty ? For the cooperative banks are holy cows – set up and ruled by powerful politicians. Moreover the RBI is handicapped by the fact that cooperative banks function under dual regulation, under which both Registrar of Cooperative Societies and the RBI are supposed to supervise their functioning; and none does that in reality.
Cooperative banks need a total overhauling. Their banking operations need to be taken out of the ambit of the Registrar of Cooperative Societies, and placed entirely under the control of the RBI; they should be treated at par with any other bank. But will the vested political interests let the government do this ? The chances are poor.
This is not the first time cooperative banks have played handmaidens to the scamsters; Ketan Parekh was found to have used Madhavpura Cooperative Bank for laundering `800 crores cash to fuel his speculative trades; in the 1992 scam too Janaki raman Committee investigations revealed that the Mercantile Cooperative Bank and Bank of Karad were involved in issuing fake Banking Receipts.