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Forex scam: Banks face Sebi scrutiny

October 19, 2015 08:46 IST

State-run Bank of Baroda and Oriental Bank of Commerce are among those facing scrutiny.

As a multi-agency probe continues into the alleged forex-based black money case involving thousands of crores of rupees, capital markets regulator Securities and Exchange  Board of India (Sebi) and stock exchanges have now begun a scrutiny of several banks for any violation of the disclosure norms for listed firms.

State-run Bank of Baroda and Oriental Bank of Commerce are among those facing scrutiny, while stock exchanges have also sought clarifications from top private sector lenders - HDFC Bank and Axis Bank.

A senior official said Sebi will take a decision on a formal probe after scrutiny of replies to the notices issued by stock exchanges.

Prima facie the regulator is of the view that the disclosure norms required banks to inform shareholders as and when they came to know about the alleged lapses on part of some staff members.

However, banks are of the view that they did not make the disclosure to the stock exchanges as the financial losses appeared to be "nil or insignificant" at that point of time, and public disclosure of those cases could have adversely impacted the outcome of international probes.

The matter relates to alleged illegal money transfers over several years to Hong Kong and possibly other foreign locations, which were passed off as payments for non-existent imports, which came to light this month.

A Delhi court on Saturday extended by six days the Enforcement Directorate custody of four persons, including an HDFC bank employee, arrested on money laundering charges in the Rs 6,000-crore (Rs 60 billion) remittances case of a Bank of Baroda (BoB) branch in Delhi.

Separately, foreign exchange worth Rs 550 crore (Rs 5.5 billion) was remitted through 11 entities to Hong Kong as payments  for imports from a Ghaziabad branch of Oriental Bank of Commerce during 2006-10.

As most of the banks whose names have come up are listed entities, capital markets regulator Sebi has asked stock exchanges to seek clarifications from them and has also begun an internal scrutiny of the matter.

Among others, Axis Bank was yet to respond to the notice from stock exchanges, while HDFC Bank said in its reply that the matter was being examined internally and it was extending full cooperation and support to the authorities.

Oriental Bank of Commerce said a Suspicious Transaction Report was sent to Financial Intelligence Unit (FIU) by the bank and a police complaint was also filed.

However, most of the banks are yet to reply to direct queries on why these matters were not disclosed on the stock exchange platform for the benefit of investors, as required under the listing norms.

The most detailed reply so far has come from Bank of Baroda, which said that the matter came to its notice in July, 2015 after which it ordered internal investigations and the matter was also reported to CBI, ED and Finance Ministry. 

However, "the bank thought it proper not to disclose the same to stock exchanges" at that point of time because there was no financial loss or it might have been "insignificant".

Also, as the probes by the bank's internal audit division and by the investigative agencies were in progress, it was thought it would be proper to wait for the final outcome of the investigation, the bank said in its reply to clarifications sought by the surveillance and supervision department of the Bombay Stock Exchange.

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