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Private Banking In India – Another Corruption and Fraud Hotspot (Citibank,Standard Chartered)

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Private Banking in India has become one of the fastest growing businesses in the country with a rising wave of millionaires forming an attractive target segment for MNC banks looking for growth.Top Indian Banks have given spectacular returns driven by India’s 8% GDP growth and increasing financial penetration.Note Private Banking or Wealth Management business involves providing taxation,wealth managment,investment,insurance and other financial products under one umbrella to wealthy customers.The private banking customers recieve privileged services from the banks who provide a one stop contact person in the shape of a “relationship manager”.Compare this to normal banking customers who face namelss contact centre operators with little knowledge.Most of the foreign banks in India like Barclays,Standard Chartered,Citibank which have a big presence in India have been hiring aggressively and targeting wealthy customers through a big marketing spend.However the services being given leave a lot to be desired.”Trust” is the biggest quality in a banking relationship as a customer trusts his life savings and in this quality these banks have failed miserably.

Standard Chartered follows dubious distinction of Citibank, 4 clients duped of crores

In yet another banking fraud at the hands of greedy relationship managers of the foreign banks, some employees of StanChart are believed to have duped a few wealthy clients. According to reports, a few relationship managers at Standard Chartered Bank’s private banking business here have mis-sold debt securities to some of its private banking clients with a promise to buy them back at higher returns, something which is not possible under the existing regulations. This comes close on the heels of nearly Rs 460-crore Citi fraud wherein a duplicitous offer of higher returns by one of its relationship manager came to light in December last year at the American bank’s Gurgaon branch. When contacted an official spokesperson of StanChart said the media report had sensationalised the issue and the amount reported was grossly incorrect.

Note Real Estate,Telecom and a number of sectors in India are notorious for the corruption and graft in their dealings.Now Private Banking also joins this infamous bandwagon.Recently a Citibank manager was caught defrauding wealthy customers and companies millions of dollars through stupid investments in stock futures.Some of the company officials were complicit in the fraud.Now Standard Chartered another foreign bank with a big presence has been caught doing the same thing.Note a lot of customers are not that knowledgeable about finance and financial products which have numerous regulations and hidden rules.So cheating is not that difficult for corrupt bank officials.Standard Chartered has been caught in illegally buying up shares in an Indian bank through unethical means as well.Note these banks have been instrumental in casuing the Great Finaicial Crisis in 2008 which led to a huge economic collapse.Now these banks have started their shenanigans in India as well.RBI is right in not granting these banks faster access to India’s financial markets despite strong political pressure from the West.It would not hurt to slap these banks with huge penalties and ban them from opening more branches in India.Putting a small penalty will not deter them from future fraud.

StanChart’s acquisition of TMB shares under scanner

The Reserve Bank of India (RBI) is looking at the way in which Standard Chartered Plc acquired a 4.64% stake in Tamilnad Mercantile Bank Ltd (TMB) even as an investigating agency is independently looking at whether the UK bank owns more than the permitted 5% stake in the Indian lender.The UK bank may have done this through a series of transactions involving an escrow account managed by its Mauritius arm, of which Standard Chartered India is a sub-agent, according to an RBI order and an official at the same investigating agency.Under India’s banking laws, no entity can own more than 5% in an Indian bank without RBI’s approval. The situation is complicated by one of the investors supposedly involved in these transactions, Katra Holdings Ltd, insisting that it hasn’t given up its 3.64% stake in TMB.While, on paper, StanChart owns only 4.64% through a subsidiary, it could actually own more, said the official. He did not want to be named given the sensitivity of the issue.


Abhishek Shah

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