RTI reveals no action against ICICI for alleged failure to keep back up of records
According to information obtained using an application filed under the Right to Information (RTI) Act, the ICICI Bank flouted norms and their failure to keep a back-up of the records lead to:
- closure of more than 2,00,000 accounts,
- suspension of nearly 50,000 accounts,
- loss of mortgage documents of tens of thousands of customers,
- of the NRI accounts, 10,000 were closed and a few thousand were suspended,
- active accounts with zero or negative balance were closed while active or dormant accounts with balance were suspended,
- loss of three-in-one online trading account opening forms of 440,000 customers and account opening forms of 55,000 NRIs.
As per the SEBI (Depositories and Participants) Act, 1996, the banks have to ensure that records are not lost, destroyed, or tampered with. It has been argued that had multiple back-ups of records at various places been implemented, the loss of records in 2005 would not have happened in Mumbai. Further, as per the Prevention of Money Laundering Act, 2002, the banks have to keep multiple hard and soft copies in a manner as may be specified by the Reserve Bank of India.
It has been contended that this action is in contravention of Section 2(1) (g) of the Consumer Protection Act, 1986, for deficiency in service to its customers by losing records, and also allegedly threatening customers to suspend active accounts and finally suspending some of the active accounts.
The ICICI bank reportedly informed RBI about the losses for the first time in September, 2006 i.e. almost one year after the loss of records in the deluge of July 26, 2005 thereby meaning that the bank operated for nearly one year without necessary documents. The SEBI was not informed about the loss of documents by ICICI, which suo-motu took notice of it. It has been reported that the regulators such as the Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI) did not take any action.
The bank has reported the loss to the National Securities Depository Ltd (NSDL) and the NSDL gave its approval in September 2007 to the idea of closing/ suspending accounts if the customers do not submit fresh AOFs by October 15, 2007.