Press Information Bureau

Government of India

Ministry of Finance

23-November-2012 19:32 IST

As per the “Draft Guidelines for Licencing of New Banks in Private Sector” issued by the Reserve Bank of India (RBI) on 29.08.2011, only entities/groups in the private sector that are owned and controlled by residents shall be eligible to promote banks.

RBI has formulated the Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT) guidelines to be followed by banks, so as to prevent banks from being used, intentionally or unintentionally, by criminal elements for money-laundering or terrorist financing activities. KYC procedures also enables banks to know/understand their customers and their financial dealings better, which in-turn help them manage their risk prudently. Accordingly, all banks, including foreign banks, functioning in India have been advised to follow certain customer identification procedures for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority, i.e. Financial Intelligence Unit-India (FIU-IND). The banks are also required to ensure that a proper Board approved policy framework on KYC/AML/CFT is formulated and implemented by them in accordance with the extant legal and regulatory framework.

This was stated by the Minister of State for Finance, Shri Namo Narain Meena in a written reply to a question in the Lok Sabha today.

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DSM/RS/ka

Residency requirement for bank promoters limits promotion to resident-owned entities and strengthens KYC/AML reporting obligations. A residency-based eligibility criterion restricts promotion of new private-sector banks to entities or groups that are owned and controlled by residents under the RBI draft licensing guidelines. All banks in India, including foreign banks, must implement customer identification procedures, monitor transactions for suspicious activity, report such activity to the Financial Intelligence Unit-India (FIU-IND), and maintain a Board-approved KYC/AML/CFT policy framework in line with applicable legal and regulatory requirements.