Banks crack down on benami accounts

Commercial banks are working overtime to close savings and current accounts held in fictitious names, to which the demat accounts called into question in the IPO allotment scam are linked.

"Nearly 60,000-70,000 benami bank accounts are being closed. It is an attempt by banks to get out of the quagmire of gross violations of the know-your-customer norms," a senior banker told Business Standard.

"Going beyond those savings and current accounts that have been linked to demat accounts, banks are generally taking a close look at all multiple savings and current accounts. Branch managers are under tremendous pressure from the higher management (to ensure the customer identification norms have been followed)," said another banker. The role of the concurrent auditors is also under scrutiny.

Depository participants, which includes banks, began closing demat accounts soon after the National Securities Depository Ltd (NSDL) sought a list from them about multiple account holders.

Sources said, "Banks have no choice but to act immediately

or otherwise the censure from the Reserve Bank of India will be much harsh."

Banks allow only one demat account to be linked to one savings or current account and the manipulation of the IPO allotment process was made possible by opening of accounts, in most cases, in gross violation of the customer identification norms, a key ingredient of global anti-money laundering initiatives.

Some of the demat accounts were opened with Karvy, a depository participant, and were linked to accounts in banks.

Inspection of some of the banks concerned by the RBI has also revealed significant irregularities in the opening of the accounts and IPO funding.

Bharat Overseas Bank, HDFC Bank, Indian Overseas Bank, ING Vysya Bank and Vijaya Bank have been accused of opening bank accounts of benami entities and apparently funding IPO applications. Other banks used by the scamsters include Citibank and IDBI Bank.

Roopalben Nareshbhai Panchal, Sugandh Estates & Investments, Purshottam Ghanshyam Budhwani and Manojdev Seksaria manipulated the banking system to make windfall gains.