RBI alarmed over growing number of illegal accounts

The Reserve Bank of India is concerned about the fact that some banks have 'lakhs' of accounts that are being used for fraudulent transactions and evergreening loans. RBI Deputy Governor Swaminathan J said that one area that has come into sharper focus in the last couple of years is the control and management of internal accounts. Internal accounts are high-risk in nature on account of its potential for misuse.

He also said that the investigations conducted by RBI have revealed there are many internal bank accounts without any valid reason. Some accounts are being used as a conduit for fraud and the evergreening of loans. RBI has cautioned banks regarding the misuse.

The inspection has also unveiled that several banks have opened lakhs of internal accounts with no valid reason. Now, it has taken a step against the misuse by asking the Chief Financial Officers (CFO) of these banks in question, to close all these unnecessary bank accounts. RBI has also instructed the banks to just keep and manage the necessary accounts. The central bank also asked the banks to keep better control of these accounts. Also, the respective banks have to check the accounts regularly and submit the audit report to the committee.         

The Reserve Bank of India’s Deputy Governor warned the banks and stated that in the last few years, special attention has been given to the control and management of the internal account. During such investigation, it was found that some banks have internal accounts in lakhs and “there is no clear reason for their existence.” He further called such accounts to be risky as it could lead to the possibility of misuse.

Apart from this, the RBI has also warned the banks as well as the non-banking financial companies (NBFCs) to keep a close eye on internal accounts. The main reason why RBI has raised concerns over this is because it suspects that these fake accounts of the banks are being used for various digital frauds.