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Axis, HDFC Bank, ICICI Fined for Violating RBI Laundering Rules

June 10 (Bloomberg) -- India’s central bank ordered HDFC Bank Ltd., the country’s biggest by market value, Axis Bank Ltd. and ICICI Bank Ltd. to pay penalties for flouting rules including those on money laundering.

Axis will have to pay a fine of 50 million rupees ($860,659), while HDFC was imposed a penalty of 45 million rupees, the central bank said in a statement on its website. ICICI needs to pay 10 million rupees.

The Reserve Bank of India’s action comes at a time when financial regulators and law enforcement agencies worldwide are stepping up efforts to tackle money laundering and fraud. HSBC Holdings Plc, Europe’s largest bank, in December agreed to pay $1.92 billion to settle a case with regulators that included the U.S. Department of Justice.

The three banks are running a nationwide “money laundering racket,” violating multiple rules including tax and banking regulations, news website Cobrapost reported on March 14, after a sting operation. The banking regulator is investigating the allegations and appropriate action will be taken against those lenders that breached rules, central bank Governor Duvvuri Subbarao said at a press conference on May 3.

“The announced penalty is too small to have any meaningful impact on the lenders,” Hatim Broachwala, Mumbai-based banking analyst at Karvy Stock Broking Ltd. said by phone. “No impact on share prices are expected when trading starts tomorrow. The penalty is only symbolic in nature.”

Sujit Ganguli, a Mumbai-based spokesman at ICICI Bank, declined to comment immediately on the penalty. Somnath Sengupta, executive director at Axis Bank Ltd., and Neeraj Jha, spokesman at HDFC Bank, didn’t answer two calls each to their mobile phones.

ICICI fell 2.1 percent to 1,117.80 rupees at the close in Mumbai today. HDFC Bank was little changed, while Axis Bank declined 1.7 percent.

To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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