RBI to share bank’s inspection report

Bowing down to pressure, the Reserve Bank of India has agreed to share relevant extracts of its banks’ inspection reports with a central economic intelligence wing to help it check money laundering and violations of other banking laws.

The central bank is expected to soon sign a Memorandum of Understanding with the Central Economic Intelligence Bureau (CEIB), an apex intelligence agency under the Finance Ministry, in this regard.

The RBI had repeatedly refused to share inspection reports with the bureau citing legal hurdles despite the matter being raised time and again during the meetings of Economic Intelligence Council (EIC) headed by Finance Minister Arun Jaitley.

The RBI was required to share relevant extracts of inspection reports with law enforcement agencies and CEIB to check black money and other financial crimes where gross violations of Know Your Customer (KYC) guidelines and Prevention of Money Laundering Act were noticed.

What happened earlier ?

RBI has earlier cited “legal impediments” in sharing the reports with CEIB as it is not a statutory body.

But RBI used to share its reports with IB which is also a non- statutory body.

RBI had reportedly refused to share the inspection reports of a few banks, which were penalised by it, on non-compliance of KYC norms.

RBI, in its response, has said that the issue of sharing such information pertains to violation of its guidelines. Hence, they could not be shared.

It was decided that the matter regarding sharing of information by RBI with non-statutory bodies (like CEIB, IB, FIU, etc.) shall be referred to the Law Ministry for its advice.

The CEIB can help in checking money laundering and other financial crimes if such inspection reports are shared by RBI in time.

The matter of misuse of Urban Cooperative Banks, over which there is dual control by central and state governments, for money laundering has been a matter of concern for central intelligence agencies.

What is Central Economic Intelligence Bureau (CEIB) ?

It is an Indian intelligence agency responsible for gathering information and monitoring the economic and financial sectors for economic offences and warfare.

The Central Economic Intelligence Bureau was established in July, 1985 responsible to the Department of Revenue, Ministry of Finance.

Along with the Income Tax Department it is India’s chief agency responsible for economic intelligence, monitoring and fighting economic offences such as smuggling, money laundering ,tax evasion and fraud.

The Central Economic Intelligence Bureau is headed by a Director General, who also carries the designation of Special Secretary to the Government of India.

What are its functions?

To collect information on various illegal economic activities and monitor sensitive and susceptible sectors of the Indian economy and financial sector.
To ensure the full implementation of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA).
It is also responsible for developing methods to counter such crimes and criminal organisations involved.
The CEIB also cooperates at the international level with the agencies of other countries responsible for customs, drugs and economic law enforcement.

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