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01-19-2010, 06:54 PM #1NιѕнyGuest
HC orders CBI probe into forex contracts by banks
[DOWN]MUMBAI: A two-judge bench of the Orissa High Court has ordered a full fledged enquiry by Central Bureau of Investigation (CBI) into foreign exchange derivatives contracts sold by some Indian banks between 2007 and 2008. In the order the HC judges have indicated that the CBI could expose ‘a large financial scam affecting the economy'.
Earlier, through an interim enquiry report the CBI had told the court in Cuttack that banking regulator Reserve Bank of India (RBI) had already initiated an enquiry against a number of banks in the same matter. The interim report had also mentioned that there were several instances of violation of Foreign Exchange Management Act (FEMA) by these banks in India when they sold those exotic contracts to companies, importers and exporters, resulting in huge losses.
In its interim investigation report, done under court orders, the CBI had pointed out at least eight different types of FEMA violations by some of the banks in India, although it did not name any of the banks. These included selling contracts structured in a way that violated FEMA and led to increase in risks, and net inflow of premium to the company buying the contract. This the CBI contended were in violation of forex rules which permit use of forex derivatives for mitigation of forex loss and no inflow of premium to the buyer of the contract. The CBI also pointed out that there were instances of false declarations, made to enter into forex derivatives contracts.
During investigation, CBI had sought information relating to banks' forex derivatives business and on some of the points raised in the petition, from eight banks: SBI, HDFC Bank, HSBC, Standard Chartered Bank, Citi Bank, ICICI Bank, ABN Amro Bank and Axis Bank. Speaking to TOI, a top banker at one of the banks said that all the eight banks, along with a bankers' trade body, had replied to CBI's queries. However, most banks that TOI spoke to, declined to comment on the matter at this stage.
The court order noted that a number of criminal offences related to forex derivatives contracts can not be ruled out. This included making false declarations deliberately by users/customers in making hedge transactions in excess of their exposures, IDG (Inter-departmental group of RBI) had identified violations which are serious in nature and appear to be intentional and deliberate, booking of contracts under past performance basis beyond 50% of eligible limit without obtaining chartered accountant's certificate and misuse of transactions by using photocopies of the same underlying to enter into different contracts with different banks.
01-20-2010, 12:16 AM #2
01-20-2010, 12:20 AM #3NιѕнyGuest
thank u ahmed