Why should Habib Bank of Pakistan being in the dock in the US bring DCB Bank under the RBI’s lens?

Because the Aga Khan Foundation for Economic Development (AKFED), which owns 51 per cent stake in Pakistan’s largest bank, holds 14.22 per cent in the small private sector lender. Aga Khan, the promoter of AKFED, is based in France and has a network of financial enterprises globally.

Habib Bank was fined a whopping $630 million (over ₹4,000 crore) by the US banking regulator for money laundering activities. This, regulatory officials in India say, has put the role of Habib Bank’s promoters, AKFED, under a cloud. “Usually, it will have to be seen if the US State Department or banking regulator signals some red flag against the promoters. In such a scenario, the AKFED will be tested for being a ‘fit and proper entity’ to promote any company in India,” a source close to market regulator SEBI said.

Reportedly, the New York Department of Financial Services on Monday said it had found 53 violations that are “serious, persistent and apparently affect the entire Habib banking enterprise”. Habib said in a statement that it will “vigorously contest” the fine in US courts, adding that there will be no “material impact on its business outside of the US,” according to Reuters.

Neither the RBI nor DCB Bank replied to email queries.

Another source close to the working of the RBI said the banking regulator typically probes any serious matter on which it receives information. The source also pointed to both the RBI and SEBI issuing advisories and cracking down on the operations of a commodity trader Reymount Commodities, which was banned in the US for money laundering a few years ago. Then, the US State Department under Condoleezza Rice had alerted the Home Ministry, which ensured action by the financial marker regulators.

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