Govt to probe IPO-tainted banks

The Reserve Bank of India has referred the seven banks fined for their role in the recent initial public offering allotment case to the government for further investigations.

Based on the gravity of irregularities and in public interest, the government will decide whether the Serious Fraud Investigations Office could be brought into the picture for a comprehensive probe, sources said.

The RBI had slapped penalties ranging from Rs 5 lakh to Rs 20 lakh on Bharat Overseas Bank, Indian Overseas Bank, HDFC Bank, ICICI Bank, Vijaya Bank, Citibank and Standard Chartered bank for breaching know your customer (KYC) norms, prudent banking practices and also for providing IPO finance to ineligible borrowers.

The government is the owner of two of the banks, Vijaya Bank and IOB. The central bank is conducting an independent probe into these banks' internal control systems and compliance cultures.

It is also investigating whether the managements had failed to take corrective actions even as the irregularities were sighted earlier.

IOB was fined (for Rs 15 lakh) for facilitating manipulation of the IPO process by a certain group of individuals by extending IPO finance to various fictitious individuals.

It also failed to monitor the unusual and suspicious transactions in the account and non-compliance with KYC policies.