The Reserve Bank of India (RBI) has proposed a review of all banking licences from the 'fit and proper' criteria, following the allegations made by Cobrapost, reports said.
In a report to the department of financial services in the finance ministry, the apex bank said "all banking licences need to be reviewed on the fit-and-proper criteria, which involves assessment of the promoters, management, CEOs, even for the existing banks".
The issue basically relates to inter-connectedness among entities forming part of a banking conglomerate, with insurance, mutual funds and brokerage arms in its ambit. The RBI note said the review was necessary to ensure that an arm's length was maintained from these various operations, to avoid a systemic risk.
However, the apex bank also said this was a judgemental call, and a decision on this matter would be taken after due deliberations.
The RBI letter has also suggested considering the issue at the Financial Stability and Development Council (FSDC) or its sub-committee, so that it can be approached in a holistic manner, after getting feedback from other regulatory agencies.
The country's three largest private banks -- ICICI Bank, HDFC Bank and Axis Bank -- were last month named by online portal Cobrapost for money laundering. The sting operation conducted by the portal alleged some officials of these banks had offered to launder unaccounted money by investing in insurance schemes.
However, the RBI report did not find merit in the allegations of money laundering in the banking system. ICICI Bank and HDFC Bank have insurance subsidiaries, but Axis Bank does not have such an arm. It offers insurance products of Tata AIG and Max Life Insurance Company as a corporate agent.
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