Anatomy of a probe: Too many suspicious bank accounts not reported

Photo: Abhijit Bhatlekar/ Mint

Live mint ;Tamal Bandyopadhyay  : Sun, Apr 07 2013. 11 50 PM IST

Commercial banks have let themselves be used by cooperative banks for high-value cash transactions

Mumbai: The Reserve Bank of India (RBI) seems to have completed the first round of its investigation of Cobrapost’s allegations on three Indian private banks being involved in money laundering even as the digital magazine on Friday released fresh videos of officials from these banks admitting to laundering money for politicians. In March, Cobrapost had released videos of its undercover sting operation that captured on camera bankers suggesting they could help clients avoid tax and convert black money into white.

RBI is unlikely to make its findings public, but senior bankers confirmed over the weekend that the chief executives of all three banks—ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd—had met RBI’s top brass and promised to pull up their socks and plug all loopholes.

RBI’s findings are not sensational, but they indeed point out that front-desk employees of banks do not always follow the rule book. They sell large amounts of gold and high-value insurance policies without following the know-your-customer (KYC) norms, allow high-magnitude cash transactions, and even fill in forms with the wrong PAN (permanent account number, issued by the tax department) to facilitate transactions.

Apart from these, banks have also let themselves be used by India’s cooperative banks for high-value cash transactions. Many such transactions have come to the regulator’s notice.

These executives may or may not be aiding and abetting money laundering, as it is still not clear whether the source of money is criminal activities and some of it is aimed at funding terrorist groups. It is also unlikely that the money will flow out of the country. Still, the transactions are very suspicious, and even if they slip through the first line of defence, the front desk of a bank, they must be classified as suspicious accounts and investigated thoroughly. The banks have not done that.

The law does not entirely prohibit banks from selling gold and insurance policies without adhering strictly to KYC norms when the buyers are not their existing customers, but they do need to report such transactions to the Financial Intelligence Unit (FIU), the central agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions to enforcement agencies and its foreign counterparts.

There is a thin line between tax evasion and money laundering. In the case of the latter, the funds may not necessarily need to flow out of a country. There could be domestic money laundering, too. These transactions may have been carried out to evade tax, and because of this the income-tax (I-T) authority should get involved in the investigation.

While the presence of high-value cash transactions and the incidence of bank branches selling gold and insurance policies without KYC have not come as a surprise, the real eye-opener is the way cooperative banks have used commercial banks to help their customers evade tax. (A retired central banker, however, said this has all along been the case and, in fact, such incidents may have come down recently.)

Cooperative banks are not full-service banks and, hence, nearly all of them tie up with commercial banks through the so-called correspondent banking arrangement to expand their reach. On their own, they cannot directly take part in the payment and settlement system, but can participate in clearing operations through a commercial bank, a member of the clearing corporation.

Unholy cooperation

It is clear that this corresponding banking relationship has been misused with thousands of cash transactions, just below Rs.50,000, the threshold for tax reporting. Under banking rules, nobody can buy a bank draft worth Rs.50,000 or more without quoting a PAN. Also, any transaction of Rs.20,000 has to be settled through an account payee cheque that can only be credited to a bank account and, unlike a bearer cheque, cannot be encashed over the counter.

Most cooperative banks extend the draft-drawing facility to their consumers through a full-service commercial bank for better acceptability of the draft by the counterparty and nationwide branch network. For this, cooperative banks enter arrangements with a commercial bank to issue drafts for their consumers for a fee.

The cooperative banks collect draft request forms from their customers, backed by either a cash deposit or cheques, and deposit the equivalent amount in the current account maintained by them in a commercial bank. The commercial bank debits the amount from the cooperative bank’s current account with itself and issues the drafts. The cooperative banks, in collusion with their customers, avoid issuance of a single high-value draft by breaking it into multiple drafts in favour of the same beneficiary, each just below Rs.50,000.

The RBI investigation has revealed that many cooperative banks have been issuing cheques in favour of the beneficiary of the draft from their current accounts maintained with the commercial banks. In terms of the current account rules, issuing a cheque in favour of the third party is perfectly legal, but the transaction should be related to certain commercial liabilities.

Also, proper KYC norms must be followed and cash transactions beyond Rs.20,000 are not permitted. Cooperative banks have taken care of this by keeping the value of transactions just below Rs.20,000 (so they can issue bearer cheques that can be encashed over the counter) and depositing cash just belowRs.50,000 for buying drafts (so that KYC norms do not come in the picture).

Transactional banking stinks

In other words, they have short-circuited the transaction-tracking process, helped their customers evade tax, and may have even facilitated money laundering—all in violation of banking rules. The commercial banks involved may feign ignorance of this, but under the norms of Prevention of Money Laundering Act, 2002, they are required to file cash transaction reports (CTRs) and suspicious transaction reports (STRs) to FIU.

Section 12 of the Act categorically says that every banking company, financial institution and intermediary needs to maintain a record of all transactions, their nature and value, and verify and maintain the records of the identity of all its clients, and furnish such data, particularly when there is a reason to believe that a single transaction or a series of transactions integrally connected to each other have taken place within a short period of time.

There have been instances where RBI has found that money was deposited in certain accounts through countless demand drafts valued at between Rs.49,500 and Rs.49,900 within months.

What does a cooperative bank gain from such transactions? It allows its customers cash transactions, helping them earn money on which they may not be paying tax.

Why are commercial banks extending a helping hand to them? They earn fees for issuing demand drafts and get so-called float money—or free money on which they do not pay interest—for a few days till a transaction is complete.

The customers are happy as it helps them avoid being identified and evade tax. So, it’s a win-win-win for all three parties involved.

There are some 1,618 urban cooperative banks, 402 state and district cooperative banks, and close to 95,000 rural cooperatives in India, including primary cooperative societies. Overall, the urban cooperative banks had Rs.2.4 trillion deposits and Rs.1.6 trillion loan assets in March 2012.

Historically, cooperative banks have been the soft underbelly of the Indian financial system. Subject to dual control by the respective state government where they are located, as well as the banking regulator, these banks have been a cesspool of politics and poor administration. RBI has tightened its supervision and merged many urban cooperative banks over the past few years to make them strong, but the latest findings of the regulator show that much more needs to be done.

Commercial banks need to change their work culture where marketing executives are under pressure to fulfil business targets at any cost. They must own up the responsibility and make transactional banking foolproof. Now, it stinks.

RBI, on its part, must look into the systems and processes related to transactional banking, something it had never done before. It’s not difficult as the so-called core banking solution can catch every transaction—good, bad and banned.

Along with the quality of assets and the process of loan appraisals and recovery, the regulator must also closely monitor all banking transactions in the entire system. Thus far, in transactional banking, RBI’s focus has been technology that can speed up the process and throw light on consumer behaviour through data analytics, but technology is run by human beings and not robots. Bank officials, under pressure to achieve business targets, cannot afford to keep their eyes closed.

Incidentally, RBI had penalized about a dozen cooperative banks in Gujarat in 2011—including Gujarat Mercantile Co-operative Bank Ltd, Shree Savli Nagrik Sahakari Bank Ltd, Shree Bharat Co-operative Bank Ltd, Waghodia Urban Co-operative Bank Ltd and Navsarjan Industrial Co-operative Bank Ltd—for violation of its directives relating to filing of STR as required under anti-money-laundering guidelines. In 2012, another cooperative bank, Abhyudaya Co-operative Bank Ltd, was penalized for a similar violation. On an earlier occasion, it was found to be not complying with guidelines while carrying out a transaction with Union Bank of India’s Zaveri Bazaar branch in Mumbai.

While every bank should be forced to file CTRs and STRs regularly, the banking regulator and the insurance regulator should also take a close look at the systems and processes of selling gold and insurance products from bank branches, and the I-T authority should step in and follow the money trail. Thousands of crores that have flowed into the banking system through transactions that haven’t strictly followed the rule book may not have left the system. If the transaction trails are followed, the government can bolster its tax collection.

Tamal Bandyopadhyay keeps a close eye on everything banking from his perch as Mint’s deputy managing editor in Mumbai.

 He is also the author of A Bank for the Buck, a book on HDFC Bank. Email your comments to bankerstrust@livemint.com

How the RBI has damaged its own credibility in Cobra’s sting

Firstpost :R Jagannathan Mar 22, 2013

It would  be a complete travesty if the CobraPost sting on India’s three biggest private banks – HDFC Bank, Axis Bank and ICICI Bank – ends up stinging either the wrong people or some scapegoats.

The signs are ominous. The Reserve Bank of India (RBI), whose job it is to police the banking system, has gone to the other extreme and pronounced the banks “not guilty” even before it gets to know the results of its own probe into the matter.

RBI Deputy Governor KC Chakrabarty, not known for verbal discretion at the best of times, said “there is no scam (that) has happened…as no transaction has taken place.” TheBusinessLine quotes him as going further and giving the entire system a clean chit: “Let us not unnecessarily downgrade ourself. Our system to prevent money laundering is perfect, absolutely nothing (wrong with it).”

It must be perfect, if a cobra’s poison fails to damage its health. Reuters

It must be perfect, if a cobra’s poison fails to damage its health.

Chakrabarty’s observations are dangerous for they assume that since that this was only a sting, and not a real effort to actually launder black money through banks and insurance companies, there is “absolutely nothing wrong”.

The opposite is true.

If a few unknown people can, with the help of cold calls, manage to get middle to senior-level bank officials from three top-notch banks to bend over backwards to help them launder money, it tells you that the supervision system is kaput. There is no guarantee that if a real crook comes along with his ill-gotten wealth, the system will not do cartwheels.

Chakrabarty also added: “Allegations do not mean flouting norms. There is not a single transaction which has taken place. KYC (know your customer) violations will happen in any system. These are all transactional issues and have nothing to do with money laundering.”

Wonderful defence. Are these just KYC violations? If banks were willing to help customers they didn’t know, is it not safe to assume that they would do ever more for customers they knew better? Even the HDFC, ICICI and Axis Bank managements could not have asked for a better defence.

If the banks themselves believed Chakrabarty’s statements, one wonders why they ended up suspending so many of their own officials who got exposed by the sting.

Soon after CobraPost showed how many branch-level and circle-level officials in these three banks were not only willing to help all comers, but were even willing to lay out the red carpet for them (read here), the banks went into a holier-than-thou mode and suspended those directly caught on tape. They talked about their high corporate governance codes, ethics and “zero tolerance” for violations.

While HDFC Bank suspended 20 officials, ICICI Bank 18 and Axis 16 while they launched investigations, some bought even external hands to make it above board.

HDFC Bank “appointed accounting and audit firm Deloitte Touche Tohmatsu India to carry out an independent forensic inquiry into the allegations and reported statements, as made by CobraPost representatives, when secretly taping bank officials.”

Today’s Economic Times makes the three banks sound even holier on the issue. The newspaper says that the chief executives have offered immunity to staff who want to blow the whistle on unfair practices and violation of guidelines. It quotes an internal staff mail from ICICI Bank CEO Chanda Kochhar as emphasising that “the bank lays very strong emphasis on ethical behaviour and has (a) zero-tolerance policy with violation in this regard. Any breach in this regard will not be tolerated.”

The other banks did much the same thing. While Kochhar is right to send this note, the moot point is this: were officials getting the same message from top management earlier? Was the pressure to lower deposit costs and earn fees by cross-selling insurance products pushing them to do things they knew were illegal or unethical? This is not a question just for ICICI, but the other two as well.

The broader point is this: the CobraPost sting clearly implies that none of the bank officials caught on camera thought they were going to be penalised for their actions. This may come only after a detailed enquiry, but if any of them thought they were being wrongly propositioned by CobraPost’s representative posing as a politician’s sidekick, they could easily have threatened to phone the cops. Or at least check with their seniors.

Since they felt empowered to do what they promised to do, it is a scam any which way you look at it.

The banks’ top bosses will always have plausible deniability. But it is highly unlikely that the second tier of management did not know anything.

Chakrabarty has not only jumped the gun, but caused serious damage to the credibility of the RBI’s supervisory intent by his statements.

As things stand, we can already discern what will happen.

One, KYC norms will get tweaked again, and ordinary people will be made to run from pillar to post to even open simple bank accounts. For those with moolah, the norms never existed, and will continue to remain on paper.

Two, the people who will pay the price will be the lowest cogs in the wheel, who will lose jobs or get docked for their service to banks.

Three, the RBI will probably fine the banks for negligence, and recommend some changes in laws for better supervision.

Four, the big bosses of the banks will have gotten a scare, but they may not ultimately face any kind of rap directly for running a system where charlatans are served with aplomb, and the rest are sent on a hurdle race.

Cobrapost sting fallout: ICICI Bank suspends 18 staff

F P :Mar 16, 2013

ICICI Bank suspended 18 employees on Friday, a day after the lender and two of its peers were accused of indulging in money-laundering activities.

The suspension has been effected pending the bank’s investigation into money-laundering charges, sources in ICICI told PTI. The probe is expected to be completed in two weeks.

Three of the the country’s largest private banks, including ICICI Bank, were on Thursday accused by online portal Cobrapost of indulging in money-laundering;  Cobrapost had unveiled the sensational findings and backed it up with sting video.

Cobrapost had at a press conference played out the sting video, which showed officials of the three private banks, including ICICI Bank, agreeing to receive large sums of cash and channel them into their investment schemes through benami accounts in violation of anti-money-laundering laws.

The video footage shows a number of senior executives of the three banks orally agreeing to take huge amounts of cash from the undercover reporter and channel them into a variety of long-term investment plans so that the black money ultimately is converted into white. However, no account was actually opened; nor was any cash deposited in these banks.

After the sting operation was played out, ICICI Bank said it had constituted a high-level inquiry, and that its report would be submitted in two weeks.

“ICICI group conducts its business with the highest level of compliance to legal and regulatory requirements. All employees of the group are trained and required to adhere strictly to the Group Code of Conduct, including AML and KYC norms,” the bank had said.

PTI

Money laundering allegation: Axis Bank initiates probe

ZeebiZ : Saturday, March 16, 2013, 11:57

New Delhi: Private sector lender Axis Bank on Saturday said it has asked 16 concerned officials to report to administrative offices, pending investigation which has been initiated with regard to alleged money laundering activities.

"The bank has initiated an internal enquiry. Pending outcome of the enquiry, we have asked 16 concerned employees to report to administrative offices," sources in the Axis Bank said.

Country's three largest private banks -- ICICI Bank, HDFC Bank and Axis Bank -- were accused of indulging in money laundering both within and outside, with an online portal Cobrapost claiming that a sting operation conducted by it has revealed a money laundering scam.

On Friday, ICICI Bank suspended 18 concerned officials till investigations are completed.

Earlier this week, the portal Cobrapost had played the contents of a purported video recording of officials of private banks including Axis Bank, allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.

The footage taken in 'Operation Red Spider', purportedly shows a number of senior executives of the three banks verbally agreeing to take huge amounts of cash from the undercover reporter and putting them into a variety of long-term investment plans so that the black money ultimately is converted into white.

However, neither any account was opened nor any cash deposited in these banks.

Soon after the revelation, the bank in a statement had said "Axis Bank has systems and processes that are robust and fully compliant with extant regulations...We are confident that all our businesses will live up to the high standards we have set for ourselves as a bank." 

PTI

Why banks’ heads can’t plead innocence

Venky Vembu:FP : Mar 15, 2013

In the end, all it took to pull down the shiny reputations of three of India’s most high-profile private banks was one intrepid reporter with a sting camera – and a yarn about wanting to launder money on behalf of a leading politician.

The images of front-office staff and middle-level managers at the branches of banks and insurance companies across India virtually gloating about their experience of handling dubious cash transactions on behalf of their other shadowy customers to get them of the taxman’s radar make a mockery of any claims that these banks may make to abiding by ethical business practices. “HDFC Bank exists merely to eat up black money,” preens a bank manager in Delhi. “I myself counted Rs 90 lakh in cash at this very table,” squeals a young lady at another bank.

What the Cobrapost sting video reveals is that the Standard Operating Procedures for money-laundering by these banks (and, almost certainly, others as well) have been refined to a high art, which points to the institutionalisation of the process within the banks. It is perhaps this that lulled the staff into a sense of complacency into being rather more indiscreet than was warranted when a potential customer walked in with the promise of bringing Rs 50 lakh worth of funny money onto their balance sheet.

All three banks have pledged to conduct investigations into the damning sting video allegations, and reiterated their commitment to the pursuit of ethical business.

Yet, only the incredibly naïve will believe that these middle-level managers and the lower-rung staff put their jobs on the line in so blatantly soliciting shady business – or that those higher up the hierarchy did not have even the faintest inkling of precisely how all that new business was being drummed up. Bank employees are, of course, set punishing targets for new business, and anyone who wants to climb up the greasy pole—and who doesn’t?—has an incentive to go rogue. But just the breezy manner in which they operated – in packs, in some cases – and the fact that so many of them (across cities) were ready to put themselves out on a limb tells a rather more sordid story: that these were the accepted norms within these banks, rather than the excesses of a rogue employee.

It’s very likely that, as happened in the wake of the Harshad Mehta stock market scandal of 1992 and the Ketan Parekh scam of 2001, the lower-level bank functionaries who were caught on camera in this case will be eased out, with a compensation big enough to buy their silence for eternity. That ought to serve as a warning to those at the bottom of the food chain: that the “oral orders” that they receive from their superiors to bend the rules don’t count for much when the game is up. Those on top will walk free, leaving them to carry the can.

Yet, for all the deniability that the heads of these banks—and the regulators—have given themselves, they cannot entirely escape the taint of the scandal. Chairman and CEOs are, of course, not in on day-to-day transactions, nor should they be. But, as stakeholders in the brand equity of the bank, they must decidedly bear the cross for the wholesale failure of governance and ethical practices mechanism that the expose represents. To claim that they didn’t know mischief was afoot or that it didn’t have even their tacit consent sounds incredulous. But even if that were true, the buck stops with them.

In his first, and only public comments thus far in response to the Cobrapost sting, Chidambaram observed on Thursday that he had spoken to the chairman of two of the banks (the third, he said, was travelling overseas), but that the government wasn’t “jumping to conclusions” about the sensational disclosures.

Coming from a finance minister who has—rightly—been deploying the carrot-and-stick approach to bring tax evaders into the net, and fairly successfully at that, that remark is considerably underwhelming.

 Under his watch, the Income Tax Department is going after high-rolling big spenders who have thus far been flying beneath the taxman’s radar – and, as he himself acknowledged on Thursday, that effort is yielding dividends, as reflected in the spike in the number of income-tax assessees this year.

But that same earnestness about going after tax-evaders seems to be lacking in Chidambaram’s response to the sting video, which establishes the widespread prevalence of rather more big fish—and politically connected ones at that—that are being helped by some of India’s biggest banks to dodge the tax net. This is doubly galling because Chidambaram is not unaware of the nature of the problem: after all, he introduced the Banking Cash Transaction Tax some years ago, solely to disincentivise cash transactions that were become conduits for channeling—and laundering—black money. (Of course, he was forced to backtrack on that provision, just in time for the 2009 elections.)

One would have therefore expected him to respond with a trifle more alacrity to the sting video’s sensational revelations of big banks helping the big fish to evade tax and launder black money. It might also help for Chidambaram to call the heads of these banks and the banking regulator to account – and not buy too readily into their anticipated denials and disavowals that these were aberrations of rogue employees of which they knew nothing. The Cobrapost video lays bare the rotten innards of the banking system, and holds an unflattering mirror to some of India’s leading financial institutions.

 Chidambaram’s response to this will determine how serious he is about going after the big moneybags that are making a mockery of the system.

RBI, FinMin take notice

PTI : The Hindu : CHENNAI, March 14, 2013

The Reserve Bank of India (RBI), on Thursday, said that it was collecting information regarding the alleged acts of laundering.

However, it added that no show-cause notice had been issued as of yet.

“The RBI is in touch with the banks, while we have not issued a show-cause notice, we are still collecting information,” Reserve Bank of India Deputy Governor Urjit Patel said.

The Finance Ministry also said that it was waiting for more details on the issue and that action could only be taken after getting feedback.

“The Reserve Bank of India has contacted the banks involved.. we have asked for more details on the expose,” Banking Secretary Rajiv Takru said.

Mr. Takru indicated that corrective action could be taken only after getting feedback from the three concerned lenders. Finance Minister P Chidambaram said two of the banks have denied the charges and added that the government would not jump to conclusions.

Why the Cobra’s sting will not poison any of the banks

In India, like anywhere else in the world, most banks are too big to fail and big bankers are too big to jail.

FP:R Jagannathan :Mar 15, 2013

If there is one prediction one can make about theCobraPost sting that exposed HDFC Bank, ICICI Bank and Axis Bank managers as being more than willing to help people launder money, it is this: after everything is said and done, more will be said than done.

A few low-level bank officials may be hauled over the coals, but the banks themselves will get away scot-free.

Consider what the government and the RBI have said so far in what appears to be an open-and-shut case, assuming the sting tapes are proven to be authentic: the government has said that it is asking for “more details”, and the Reserve Bank Deputy Governor has said that “we are still collecting information,” reports The Hindu.

In due course, show cause notices will be issued, RBI officials will inspect the books of banks, the taxman will pore over the numbers and the banks themselves will probably get fined. But the issue will be a buried after a few months with minor collateral damage (a few suspensions of bank officials, even some sackings, but nothing more).

This may sound cynical, but there is a certain logic to it: in India, like anywhere else in the world, most banks are too big to fail and big bankers are too big to jail. Regulators are wary of being too harsh, for fear of scaring the public away from banks. If the public starts worrying about the safety of its money, there will be a run that no one can afford.

Banks that are too small to escape action are usually allowed to merge, and their crooked bosses simply scamper away in the darkness.

This has been the story with every major scam in India after the reforms. In fact, it would not be wrong to say that every scam has a banking angle to it. Reason: scams involve money, and money is what banks handle.

However, while some of the principal scamsters may go to jail or stay tainted forever, the bankers who aid or abet the scam – unless they happen to be very small fry – usually walk off into the sunset quietly or escape with little more than a rap on the knuckles. In fact, the system goes out of its way to dub all bank scams as some other scams, even stock market scams, but never as bank scams.

Let’s start with the major scams after liberalisation in 1991.

The first one to break cover was the Harshad Mehta scam. When Manmohan Singh freed interest rates on government securities, the resulting rise in rates sent banks’ existing holdings of government bonds down. Faced with huge portfolio losses (when rates rise, the prices of securities fall to adjust for yields), banks tried to recoup the losses by making money in stocks – something they couldn’t afford to do legally. This is where Harshad Mehta walked in offering to help.

He stole banks’ securities, used them as collateral to raise more money, invested the money in stocks, made money on stocks and then returned the securities and the money to banks with higher returns. He tried to gift profits to banks using their own money.

This Ponzi scheme could not go on forever. Banks were willing collaborators with Mehta in the beginning, but when the music stopped, it was Mehta who went to jail. The State Bank of India, Citibank and Standard Chartered were all in the thick of it, but none of them received anything more than a fine and a rap on the knuckles. In the end, the bank scam got dubbed as a stockmarket scam and everybody was happy. Mehta died in jail.

Then came the Ketan Parekh scam during the NDA regime. This stockbroker was ramping up the shares he was punting on – among them Himachal Futuristic, GTL, Zee Telefilms (now Zee Entertainment), Satyam Computer, Pentamedia, Silverline Technologies, etc.

Around the same time, Global Trust Bank, which had Ramesh Gelli as CEO, had been losing money on its bad loans. To recoup some of it, GTB threw caution to the winds and lent heavily to market players since this was more profitable than lending to other borrowers. But this could have helped only if the market continued booming, which didn’t happen. As the market crashed, GTB was left with huge potential losses and its own share prices started falling. It tried to merge with UTI Bank (now Axis) and failed. It had to be rescued when the Reserve Bank put a shotgun wedding through with the public sector Oriental Bank of Commerce.

GTB’s wrong lending practices were a bank scam, but the idea got subsumed in Ketan Parekh’s stock scam, which too came to an ignominious end with the market crash. Parekh slunk off into the darkness, but is alleged to be operating covertly.

Or take the IPO scam of 2005-06, where several individuals were shown to be opening multiple demat accounts with banks in order to increase their chances of share allotment in a booming market. When Sebi discovered the scam, the RBI had to act.

It did, but guess what? The seven banks who got caned were fined paltry sums of Rs 5-20 lakh each. That’s chickenfeed for them. The banks involved were ICICI Bank, Citibank, Standard Chartered, HDFC Bank, Vijaya Bank, Bharat Overseas Bank and Indian Overseas Bank. Five private banks, and two public sector ones.

Or take the Satyam case. True, promoter B Ramalinga Raju’s confession said that he had overstated cash and bank balances of more than Rs 5,000 crore in January 2009.

But would banks have not known he didn’t have enough cash in their accounts? The Indian banks who were allegedly holding Satyam’s fixed deposits were Bank of Baroda, BNP Paribas, Citibank, HDFC Bank, HSBC and ICICI Bank – its principal bankers.

When Satyam was claiming so much in fixed deposits, and little of it was showing up in their books, would any banker not have known that something was amiss?

But bankers always look the other way when it is somebody else’s scam, and they themselves don’t face any losses. They never rock the boat if they are making some money too, never mind the illegalities involved.

There is no way bankers could not have suspected Satyam’s fibbing; but they chose to keep quiet.

Coming to the CobraPost sting, the RBI could easily have suspected that when there is so much black money sloshing about in the system, a lot of it will be with banks.

Money has to go somewhere – and even if it is invested in other assets like gold or real estate, it has to pass through banks.

The public perception about black money is that it is somehow different from white money. The only difference is taxes paid. Actually, white and black keep mutating depending on who is using the money.

When I earn a salary, it is white and tax-paid. If I pay my broker in cash for a house I am buying, a part of it becomes black. But when the broker buys, say, groceries with the cash at a mall, the money again become white. And so on. No bit of currency is permanently white or black.

It would thus be surprising if the government and the RBI did not know what was happening with not only HDFC, ICICI and Axis Bank, but also with some of the nationalised banks which are under pressure to raise cheap deposits. The chances are they know and prefer to keep quiet.

In the 2G, Commonwealth and Coalgate scams, the money would have passed through the banking system – either at home or abroad – but the cash trail has gone cold and no bank is in the dock for it.

Banks too know that they are too important to be rattled by the powers-that-be.

 Nothing big banker is going to be poisoned by the CobraPost sting.