by

V. Subramanian

1.    Importance and Implications of KYC Norms and PML Guidelines

The new entrants into banks (in Clerical or Officer Cadre) do not know the importance and implications of KYC and PML guidelines.  Nor are they taught about them properly by their management.  Therefore, these raw hands take everything casually. 

I will narrate one real incident.  In a big city in Maharashtra, one Probationary Officer opened hundreds of accounts during the ‘Road Show’ conducted by the bank.  In many of the accounts opened on that occasion, serious compromises were made with regard to KYC and PML guidelines.  The management was well aware of the lapse.  The major thrust at that time was on opening as many CASA accounts as possible per day, without going into their quality.

Subsequently, in one of the accounts, a major fraud took place.  The fraudster had opened the account using forged documents and took delivery of a cheque book in his account.  The incident was thoroughly probed and the management ‘found’ that there were serious lapses in following KYC and PML norms.  Accordingly, the said Probationary Officer with less than a year’s experience in the bank was charge-sheeted and punished.

Yet, such incidents do not serve as an ‘eye opener’ for others.  As long as somebody else is punished, others do not bother themselves.

2.    It must be remembered by every one that Bank Passbook (with the photograph of the customer) is one of the important documents demanded for various purposes such as –

(a)  Applying for a Mobile SIM Card

(b)  Booking tickets through IRCTC website

(c)  Applying for a new telephone (landline) connection

(d)  Applying for a Ration Card

(e)  Applying for a Driving Licence

(f)   Applying for Voter’s Identity Card (EPIC)

(g)  Applying for PAN Card

(h)  Applying for a new Gas connection

(i)    Applying for ‘Aadhaar Card’

(j)    Applying for a Passport

3.    ‘One person, One Customer ID’ Rule

Right now, it is observed that several customers have multiple Customer IDs.  While some were created at the request of the customers concerned, in case of the rest, the bankers themselves suggested to the customers (read as depositors) concerned to have more than 1 Customer ID to escape from TDS.  It must be ensured that one person is allotted only one Customer ID for all types of his accounts.  Better still, the customer’s photo must be scanned and uploaded beside the Customer ID.  If done, it will be an effective check on the generation of black money and wealth and the resultant tax evasion. Unfortunately, many bankers who desperately want to reach the Deposits Target adopt the pernicious practice of allotting different Customer IDs to the same person, by changing the person’s name as follows:

(a)  K. Dhananjay

(b)  Dhananjay K

(c)  Dhananjay Kumar

(d)  Varanasi Dhananjay Kumar

             (This name has been used only for illustration purpose)

4.    Limit for cash transactions of each customer is to be fixed as follows:

(a)  Rs.20,000 per transaction

(b)  Rs.50,000 per day

(c)  Rs.200,000 per month

(d)  Rs.12,00,000 per annum

All the above-mentioned conditions must be satisfied for each account.  However, in case of more than one account in the same name and style, the ceiling stipulated as above will apply for the transactions in all the accounts (of the party) put together.

What will happen, if any of the above-stated limits is breached?

TDS at 10% will be deducted for all subsequent transactions and remitted to CBDT Account.

5.    Right now, apart from business and trade purposes, the parties are misusing the banks for –

(a)  Paying monthly salaries to their staff of large numbers, through bulk posting

(b)  Paying EMI to the loans taken from external sources (this is done through post-dated cheques or ECS mandate)

(c)  Paying for the personal expenses and investments of the account holder/s

(d)  Splitting large value transactions into innumerable transactions of small value

(e)  Diversion of funds with the knowledge and countenance of the lending banks themselves

(f)   Cleverly hiding a long trail of suspicious transactions by undertaking labyrinth of many transactions spread over time and space and across various institutions, where the connection between one transaction and another cannot be established easily

6.   In case of running accounts (other than SB), Folio charges are now levied to discourage large number of transactions and to recover at least a part of the cost of each transaction. In addition, Minimum Balance charges and Cheque Book charges are levied. However, these charges may be done away with and instead, charges may be levied for each transaction, as follows.

            Note:

         Where the total number of transactions in an S.B. Account exceed 75 in a Quarter, that account has to be necessarily converted to Current Account in the succeeding Quarter. However, a Current Account once opened/converted thus cannot be reconverted to Savings Bank Account, even if the number of transactions in a particular quarter is less than 75.

7.    All transactions of following types must automatically be reported to Head Office, RBI and CBDT then and there.

(a)  Any single transaction exceeding Rs.10 lakhs in S.B. accounts and Rs.25 Lakhs in Current accounts.

(b)  Any account having an annual turnover (credits summation) of Rs.1 Crore and above

(c)  Any loan account or a group of loan accounts of a party with an aggregate liability of Rs.1 Crore at any point of time

(d)  Credit Card spends exceeding Rs.1 Lakh per month

(e)  Properties (mortgaged to banks for whatever purpose) with a value of Rs. 1 Crore and above

(f)   Any Foreign Currency transaction of value exceeding Rs.10 Lakhs

(g)  Where the inward/outward foreign remittances of a party exceeds Rs.10 Crores per year