The Enforcement Directorate has fined Standard Chartered $13.6 million (Rs100 crore) for breaking foreign exchange rules when it worked on the takeover of Tamilnad Mercantile Bank in 2007. This is perhaps one of the largest penalties imposed on a foreign bank in India. The ED had carried out an 8-year investigation into possible violations of FEMA by the bank when it worked with a group of investors to buy a stake in Tamilnad Mercantile Bank. An official of ED said senior officials at Standard Chartered saw an investment in TMB shares as an opportunity that might ripen into eventually larger ownership for the bank. The bank confirmed it has received the order from ED and it is evaluating it. The ED order also pointed out that the bank also acted as a custodian for shares on the deal. Tamilnad Mercantile was fined ₹17crore on similar charges. Around 13 years ago Tamilnad Mercantile Bank had transferred 46,862 shares to overseas investors, including GHI, Swiss Re Investors, FI Investments and Cuna Group, without seeking permission from the Reserve Bank of India, the order says and some of those shares were then transferred to Sub-Continental Equities, an affiliate of Standard Chartered, later, also without RBI’s permission.
