New Delhi: Cracking down on money laundering, the Reserve Bank of India (RBI) has closed down six Urban Cooperative Banks (UCBs) which were suspected of being used to route illegal money.
The central bank has also asked state governments to take stern action against any other erring UCBs after reports emerged that such entities were being used as conduits for money laundering.
The matter of misuse of UCBs, over which there is dual control by central and state governments, was discussed during a recent meeting of the Economic Intelligence Council (EIC) headed by Finance Minister.
UCBs are inspected annually or once in two years depending on their ratings or classification. About 70 per cent of these urban cooperative banks are subjected to inspection every year. RBI has aggressively pursued the issue and around six UCBs were closed as they were found to be "unviable", according to the minutes of the meeting.
Sources who were present at the meeting said it was found that these banks were lax on regulatory issues and were used as conduits.
"RBI had taken up the issue with the state governments and also advised stringent action against the erring UCBs," it said, but did not disclose the names of the banks.
On the issue of risk categorization and compilation or updating of profiles of all their existing customers, the apex bank said their regional officers have been advised to seek compliance from UCBs and submit an update which would be reviewed and any necessary action initiated.
RBI has been directed by the Chairman, EIC, to block accounts of non-complying customers while keeping the credit option open. The customers would be able to credit money into their accounts but the withdrawal facility would be activated only when the mandated information is furnished.
The action comes after it came to be noticed that the UCBs, which hold deposits of over Rs 2 lakh crore, are being misused for money laundering, causing alarm to the government.
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