When Citi was sleeping

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January 4th, 2011 Joydeep Ghosh

“Citi never sleeps” is the famous campaign of the bank. But then, it was sleeping like Kumbhakarna for almost a year.

If one were to go by news reports, a Citibank employee and his accomplices were investing monies – almost Rs 400 crore – of high net worth individuals through brokerage houses for a while now.

Corporate houses like the Hero group and 20-odd people invested in schemes which were sold to them by showing them forged letter of the market regulator, Sebi.

While the bank may argue that bigger scams have taken place all across the world, including India. But one would expect the bank of this size – another Kumbhakarna feature – to have better due diligence systems.

Aren’t there supposed to be quarterly audits, at least? How do they prepare their results otherwise?

It is slightly difficult to believe that there only one person involved. If the employee was issuing cheques on the behalf of a client, there had to be a second signature.

It is easy to understand that the clients were offered super normal returns (high returns at higher risks) and they fell for it. No wonder, they are cheated often because they do not understand the nuances of the product.

But can a bank, which is supposed to be specialising in these things, plead not guilty of the same? Can Rs 400-crore be diverted/ invested by one person without any scrutiny?

My fear is at a very basic level…

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2 Responses to “When Citi was sleeping”

  1. Joydeep Ghosh Says:

    Dear Dipak, being a banker, I am sure you know more about the nitty-gritties of banking. Sure, even the people, with crores in their bank accounts, should have had more sense.
    What I fail to understand is this. If you wish to tell me that the bank had no responsibility when an employee was transferring money from their customer’s account, I would not buy it.
    As far as giving cheques in the name of the person goes, I do not think it happened. The bank had blank drafts in its possession (Pl read Mr Aggarwal’s interview in any paper, where he says it is Citi’s policy) which was used to transfer money. If cheques had been issued in the employee’s name, no one would have blamed Citi. I stand by my view.

  2. Dipak Says:

    Guys, no doubt Citi has failed but more than that people who invested in these schemes are to be blamed. these people who had tonnes of money fell for the greed and burnt their fingures. being a banker i know that never a scheme would be floated wherein individual people are custodians and bank would ask investors to issue cheque in the name of its employee. come on that much commonsense should be there for people with crores in their bank account..i think it shows that money comes from fluke for some people..let us not just blame citi only..so joydeep do not just give one sided opinion…as it might bias the thinking process of millions..print balanced view

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