The Reserve Bank of India (RBI) has found lapses in some banks maintenance of records on cash deposits and withdrawals. In a recent communication to all commercial banks, except regional rural banks, the Reserve Bank of India stated: ‘‘.some banks have not been strictly following instructions particularly in connection with record keeping of cash deposits or withdrawals of Rs 10 lakhs and above. It is also reported that branch managers are not closely monitoring cash withdrawals for large amounts and are not regular in reporting such transactions to the controlling offices’’. In this connection, the Reserve Bank of India has asked all commercial banks to ensure that no new accounts are opened by banned organisations and advised them to strictly adhere to guidelines regarding opening and monitoring of accounts. The Reserve Bank of India has also called for a closed-door meeting next week with banks’ chiefs to discuss measures for preventing frauds. The Reserve Bank of India is categorical that the lack of due diligence in opening accounts without proper verification of the identity of the customer and in subsequent monitoring of the accounts has exposed banks to the risk of possible use of such funds for terrorist financing and themselves being used as intermediaries for the deposit and transfer of funds derived from criminal activity. As per the guidelines, every branch should maintain a detailed record of individual cash deposits and withdrawals for Rs 10 lakh and above. The Reserve Bank of India has instructed banks to adopt best practices as per the suggestion of the Dr NL Mitra committee in August 31, 2001 on the legal aspect of bank-frauds. The committee said that ‘‘every bank, financial institution and financial intermediary should be required to develop Best Practice Code (BPC) within a time frame and submit the same to the regulator’’. The committee also pointed out the need for effective measures to internalise the BPC in its staff, effectively supervise the functionalisation of the BPC, control and monitor variation from the BPC, enforce BPC in the use of discretionary power and make documentation of the same, periodically review the use of discretionary power, conduct periodical legal system, audit and obtain compliance certificate.
