RBI looking at banking regulations, not black money: Thakru

The RBI's report into the tax evasion allegations levelled by Cobrapost against Axis Bank, ICICI Bank and HDFC Bank has been accepted by the government. Banking secretary Rajeev Thakru said the report throws up many serious systemic and structural flaws in the processes these banks have been following.

He added that Reserve Bank of India (RBI) would take action on these issues. However, he said it is too early to say whether criminal prosecutions may take place.

Below is an edited transcript of Thakru's exclusive interview to CNBC-TV18. 

Q: What are the key takeaways from Reserve Bank of India’s (RBI) report on Cobrapost sting?

A: We got the report a couple of days ago. We are currently looking at it and they have raised a large number of issues. They have addressed all the points, which came out in the sting operation. They have a number of observations, which they have made.

There is a lot more to be done. At the moment it is a little premature again to start talking about what would be the takeaway from it.

It would be safe to say that there are actionable points where Reserve Bank of India would need to take some action and consequently government would also need to address them. But we would be following a process here. Once we have got the things organised and actionable points are isolated then I suppose the concerned parties would be asked for their version of things, because, this is after all, it is observation of an audit party and we would seek their comments and thereafter decide how to proceed.

Q: Since this was a sting operation, there were no real transactions. Are you going to look at actual accounts and see if any of those contain black money or actual transactions have taken place?

A: We are not talking here about black money because neither the RBI nor the ministry is the competent authority perhaps to decide whether money is black or white. Money has no colour; as far as we are concerned, money is money. Now, what the Reserve Bank of India is looking at is the banking regulations and how the banks have behaved and how the individuals who are working in the banks have behaved when it comes to following processes.

So, we are not talking here about black money. Let me clarify that we are talking here about transactions and regarding the transactions. The transactions, which do not appear to have followed procedure, have been isolated. The kinds of defects, so to say, have been isolated and that's what needs to be addressed because you would need to do two things. We would need to work on parallel tracks, 1) we would need address systemic issues, which have been brought out clearly and 2) we would need to address the actual acts of omission and commission, which are demonstrated to have taken place, and which after following due process the regulator comes to a conclusion have taken place then regarding those particular things, which have already happened the decision would need to be taken.

Q: Does that mean that there will be prosecution against the employees that are depicted in the sting?

A: No, I don't want to sound alarmist at all. We are not talking of prosecution. We are not talking of anything at all. We are only saying that we need to address them. So, let us not jump the gun. Let us not say that we are going to start prosecution; we are going to send people to jail and we are going to do all kinds of things.

No we are not saying that at all. I don't think we should be even speculating on such things. However, if something has happened and if responsibility has to be fixed it will be fixed. But first you have to identify who all are responsible and only after that we will proceed.

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