Reserve Bank Deputy Governor KC Chakrabarty said asked banks to adopt a system to identify violations in know your customer (KYC) norms and rectify it immediately.
Chakrabarty said this in the context of the recent Cobrapost expose, which claimed that almost all the banks and financial institutions are flouting KYC norms.
Banks in the country does not have a strong compliance culture because the last bit on rectification is missing with the banks, he said.
He wants banks to adopt a compliance policy, structure, manual, properly identified people and an internal audit as well. Compliance, he said, acts like a lubricant which runs the business machinery of a bank.
Given that in total, there are 54 legislations, which affect banking business directly or indirectly, the function of compliance is especially necessary, he said.
He was speaking after launching a certified banking compliance course by the Institute of Company Secretaries and the Indian Institute of Banking and Finance here this evening.
He cited the example of external commercial borrowings by companies, saying corporates should hedge against foreign currency exposures, something which RBI has been repeatedly asking them. But many don’t do that, and that may be a cause of concern for the country’s finances in case of any negative event.
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