Mumbai: Close on the heels of nearly Rs 460-crore Citi fraud wherein a duplicitous offer of higher returns by one of its relationship manager at Gurgaon branch of the American bank came to light in December last year, in yet another banking fraud some employees of StanChart bank have allegedly duped a few wealthy clients. (Agencies)
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.
When contacted an official spokesperson of StanChart said the media report had sensationalised the issue and the amount reported was grossly incorrect.
"This is a small matter involving just four clients and we working with them on a quick resolution," he said but declined to give further details.
However, sources in the bank said the issue involves three relationship managers, one of whom has already been shown the door while an internal probe is underway on the other two.
The sources further said that in fact there is no investor who has lost money as they are publicly traded bonds and investors can recover their money by selling them.
On the question of the impact of this incident on the bank's reputation and possible regulatory clamp down on private wealth management banking, the sources said, "this involves only four people and not three employees and a systemic issue."
According to a report, Rs 150-200 crore of such debentures were sold by StanChart's relationship managers to their private banking and wealth management clients, which quoted two people in the wealth management industry.
The multinational Standard Chartered is the largest and oldest foreign bank in the country, and India is the largest profit centre for the bank, according to its latest audited reports.
The report also said that the bank itself funded some of the duped investors of the fake debentures. The products on offer included debentures of real estate firms and a Delhi-based education company, according to the report.
The matter came to light when some of the investors tried to sell the papers back to StanChart and the bank declined to do so, as it is not permissible to buy back or repurchase of corporate bonds between a bank and a private client.
Under the existing norms, repurchase of corporate bonds can happen only between institutions like banks and bond houses that are regulated by the Reserve Bank.
"These clients were keen to raise funds before March 31 financial closing, but were unable to do it. Some of them have threatened to lodge an official complaint. As of now, only a few clients have realised the irregular nature of the transaction," the paper said, quoting the industry source.
The bank has asked some officials to quit following probe by the compliance department of the bank and Ashish Shankar, head of investment advisory at its private banking vertical, is reported to have gone on leave, said the report.
Since this is the second instance of rogue and greedy wealth managers crossing the limits in their bid to make some quick bucks, the RBI and markets regulator Sebi may be forced to clamp down on private wealth management industry and tighten private banking and wealth management rules.
Mumbai: Close on the heels of nearly Rs 460-crore Citi fraud wherein a duplicitous offer of higher returns by one of its relationship manager at Gurgaon branch of the American bank came to light in December last year, in yet another banking fraud some employees of StanChart bank have allegedly duped a few wealthy clients.