While none of the top private or public sector bankers The Indian Express spoke to wanted to be named, they were unanimous in their assessment that they were being made a “scapegoat.” (Representational image) While none of the top private or public sector bankers The Indian Express spoke to wanted to be named, they were unanimous in their assessment that they were being made a “scapegoat.” (Representational image)

THERE is growing concern in banks, both government-owned and private, over what they see as the Income-Tax department, Enforcement Directorate and other investigative agencies training their guns on them and portraying them as the “villain” in the government’s demonetisation piece.

While none of the top private or public sector bankers The Indian Express spoke to wanted to be named, they were unanimous in their assessment that they were being made a “scapegoat.” Especially when most of the money demonetised on November 8 has returned and there are continuing reports of distress given the inadequate flow of new currency across the nation.

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“As it is, we are bearing an enormous cost of compliance. We had to recalibrate ATMs at short notice, hire private transport to move cash, hire more security, waive off so many different charges, etc. Banking has come to a standstill, with the entire focus on just customer deposits and withdrawals,” said a private banker, who did not wish to be named.

O P Bhatt, former Chairman, State Bank of India, said, “True, some things have gone wrong. Banks should not be made the villain in the piece. There has been some process and communication breakdown.”

Another former state-owned bank chairman and managing director said, “There has been so much pressure, public abuse and threats to bank staff. It has been a unpopular move, but banks are being made a scapegoat. Look at the volume of deposits the banks have handled – over Rs 13 lakh crore, transaction at branches are 100 times more, the stress has continued for well over a month. Yes, there are a few black sheep in every system, but the entire banking community is being blamed.”

According to this banker, several current CMDs have been fearing “what next?”

Over the last fortnight, there have been reports of several tax raids on banks and even arrests of bank employees by the Enforcement Directorate. Two branches of Axis Bank branch, one in Chandni Chowk, Delhi and the other in Noida, and a Pune branch of Bank of Maharashtra have been reportedly raided in the past few days. On Wednesday, there were reports of the ED tracking “suspicious deposits” in the Karol Bagh branch of a private bank based on a tip-off by the Financial Intelligence Unit (FIU). Tax officers have claimed deposits of crores in accounts of fake companies or discovery of crores in new currency in lockers. The Finance Ministry or the Central Board of Direct Taxes has not issued any official statement on these so far. But these well-publicised raids have rattled banks.

“In the case of deposits, the I-T department or the FIU learns of large transactions only after the bank makes these disclosures. So, how is it that such information is presented as if the revenue authorities have discovered these. In fact, we actively cooperate with the authorities on every such case,” said a private sector banker.

All India Bank Employees’ Association General Secretary C H Venkatachalam said, “We are being characterised as villains and fraudsters.

That is the impression. This is creating doubts in the minds of people. It’s time the bank managements stood up and defended their employees. The RBI should intervene.”

AIBEA, which met RBI officials recently, plans to take a delegation to the Prime Minister’s Office and discuss the situation with the Indian Banks’ Association. “I am just seeing the situation. (Narendra) Modi is being unfair by keeping quiet.”

A private bank CEO said it is banks which are faithfully reporting all high-value transactions to the designated agencies including the Financial Intelligence Unit. “The tax department leaks such information and this suddenly results in an impression that banks have acted in connivance with black money hoarders in accepting large deposits. This undermines trust in banks. As a bank, I am not supposed to ask questions of a fully KYC-compliant customer when he or she comes to deposit money, whatever may be the quantum,” the banker said.

Venkatachalam also said, “I have no need to question the customer. All high-value transactions automatically get reported to the Income-Tax department. It is for the I-T department to ask questions. They have to ensure compliance with tax laws, not the banks…Suddenly, we hear Rs 6 crore found, Rs 20 crore deposited, Rs 80 crore new currency found. What is all this? While banks have nothing to do with this, the entire burden has come on our head,” he added.

Another public sector banker said, “Neither do we have the manpower, nor our systems so robust to handle such large volumes. There is massive demand for fresh legal tender, but supply is limited. It’s unfortunate that banks are the interface for currency needs of the customer.”

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