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India Central Bank Imposes $8.3 Million in Fines for 22 Lenders

July 15 (Bloomberg) -- India’s central bank ordered 22 financial firms including State Bank of India and Deutsche Bank AG’s local unit to pay a combined $8.3 million in penalties for flouting rules including anti-money laundering regulations.

State Bank, the nation’s largest lender by assets, will be fined 30 million rupees ($501,000), while Deutsche Bank will need to pay 10 million rupees, the Reserve Bank of India said in a statement on its website today. Another seven banks were sent notices to ensure compliance with the norms.

The crackdown in India follows efforts by financial regulators and law enforcement agencies worldwide to curtail money laundering and fraud. HSBC Holdings Plc, Europe’s largest bank, in December agreed to pay $1.92 billion to settle U.S. probes of money laundering, while the U.K.’s financial regulator said the bank will have to employ an independent monitor to oversee compliance.

The Reserve Bank in June had separately penalized HDFC Bank Ltd., the country’s biggest by market value, Axis Bank Ltd. and ICICI Bank Ltd. for flouting the rules. Axis was ordered to pay 50 million rupees at that time, and HDFC Bank 45 million rupees, with ICICI at 10 million rupees. Today, the largest fine was levied against the government-controlled Indian Overseas Bank, at 30.02 million rupees.

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

Cautionary Letters

Cautionary letters were issued to seven banks - State Bank of Patiala and the local units of Barclays Plc, BNP Paribas SA, Citigroup Inc., Royal Bank of Scotland Group Plc, Standard Chartered Plc and Bank of Tokyo Mitsubishi UFJ Ltd. - after the central bank’s scrutiny didn’t expose any “serious” violations or the firms’ explanations were found to be “satisfactory,” the RBI said today. The regulator didn’t impose monetary penalties on the seven lenders.

S&P BSE Bankex index, a gauge for banking stocks in the country, gained 0.7 percent in Mumbai, with State Bank of India shares climbing 1 percent to 1,912.30 rupees.

To contact the reporters on this story: Anto Antony in Mumbai at aantony1@bloomberg.net; George Smith Alexander in Mumbai at galexander11@bloomberg.net

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

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