Set your house in order, govt tells Axis Bank

New Delhi: The government has asked Axis Bank to “set its house in order” after a series of

irregularities

linked to exchange of old notes were detected at the country’s third biggest private lender. “The message has been conveyed to them,” said a government official, who did not wish to be identified.

Authorities are concerned over connivance of some bank executives with “racketeers” to launder cash. “This is a matter of serious concern,” the official said. He said government agencies will now detect the trail left by cash deposited in some of the accounts. The government is also concerned over role of some bank officials in siphoning off a large number of new currency notes.

Axis Bank sources, however, denied receiving any message or advice from the government. “Like other banks, we are interacting with RBI, ED and the tax department almost on a daily basis and cooperating with them. We have not received any communication or there has been no conversation around this,” said a senior bank executive. The executive added that the bank was “receiving guidance” from the RBI and it stepped up an internal system of alerts on suspicious transactions to detect any possible misuse of network.

The spate of action by government agencies against some Axis Bank branch staff had triggered rumours that its licence would be cancelled. However, the RBI stepped in to say that there is no such move. “The clarification comes in the background of rumours in a segment of the media that the bank was likely to lose its banking licence,” the RBI said in a statement on Monday.

Axis Bank has also suspended accounts of several bullion dealers as a precautionary measure after authorities found that some employees had opened bogus accounts to deposit old notes and later funnelled into accounts of gold traders.

Last week, the bank had suspended 16 employees following action by ED that led to arrest of two managers of the bank. Axis Bank has also appointed consultancy firm KPMG to undertake a forensic audit of account-opening process.

Raids on jewellers after the government scrapped some high value currency notes revealed that they had collected old currency in advances against sale of gold and laundered cash using bank accounts. The shell accounts into which cash was deposited included Sunrise Trading, Himalaya International and RD Traders with New Delhi’s Kashmere Gate branch of Axis Bank. Close to Rs 40 crore of old notes were alleged to have been swapped using these accounts.

Axis Bank has said it has zero tolerance towards any deviation on part of any of its employees from the set model code of conduct. “Strict action will be taken against any employee found deviating from the guidelines. We would also like to add that we are cooperating with investigating agencies,” Axis Bank said in a statement while responding to incidents at Kashmere Gate branch.

The Mumbai-based private bank has a large number of jeweller accounts as it is the largest Indian importer of gold on a consignment basis. The fraud was detected after Rs 3.7 crore old currency was seized from three people outside Axis Bank’s branch in the capital.


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