Hit by the massive fraud in its Gurgaon branch perpetrated by its rogue relationship manager Shivraj Puri, Citibank is planning to compensate the victims, even as it moved 'damage control' interactions with its high networth individual (HNIs) customers into high gear.
Puri allegedly diverted over Rs 300 crore of funds from customers and non-customers of Citibank, into personal accounts and had been investing in equities market for over a year.
In a statement issued on Saturday, Citi said it had been in contact with "impacted customers" and was in the process of reconciling the amounts involved with the customers. It is in the "process of working towards a fair compensation for them," the bank said.
Other banks, meanwhile, have been moving to try and snatch some of Citibank's HNI customers, citing that lack of sufficient risk management systems had led to the fraud.
"A couple of days back, I have got a call from Citibank guys asking me to participate in their HNI meet, perhaps to explain their side of the (fraud) story. I am not even a Citibank customer. I see it as an exercise to retain or boost customer base in the wake of the fraud," said one of the top three executives of a listed broking house, who wished not to be named.
Sources said Citi had been responding to a flood of calls on the issue after the scam broke, though the number has been tailing off in recent days. Ctibank, however, declined to comment on the issue of rising interactions with HNI customers.
Police investigation into the issue, revealed that Puri had attracted these funds from some people, including those of Hero Honda promoters, by offering a high returns of two per cent per month. Puri is in police custody for further investigations. About 40 persons or representatives of institutions or companies had walked into the trap laid by Puri.
Most of those affected were wealth management customers of Citibank, with high net investible resources. While Citi's wealth management entry threshold is Rs 36 lakh, it has a far more lucrative private banking business. The entry norms are reported to be much higher - Citi does not divulge details of its private banking business, but banking sources said only clients with minimum investible resources over Rs 5 crore qualified.
It offers a range of services to such clients, including Trust Services, Philanthropic Advisory, Art Advisory, Aircraft Advisory and Sports Advisory.
Sometimes, wealth management involves investment of surplus funds of customer in their bank accounts for maximum returns and releasing funds for specific occasions of the customers like education, marriage and the likes in the customer's family.
Thus, wealth management is driven by returns and trust, which is what other banks want to emphasise and grab Citibank customers away. "This is an opportunity for us to enlist Citibank customers, citing that our bank has better risk management systems and practices compared to that bank," a relationship executive of another bank, who is not authorised to speak to press, lamented.
However, the institutional advisors feel that the Gurgaon fraud of the bank, that raised questions about the customer handling practices followed by banks in general, is unlikely to hit HNI business for them, though 'sentiment' has been affected to an extent. An institutional equities head of a listed broking firm said, "It is not a big issue for our business. But sentiment-wise, yes, it has some impact."
Courtesy: Mail Today 
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