Citigroup and India
Governments rescuing
once proud banks has
become a routine in the U.S.
and the U.K. In many cases,
governments are among the
largest shareholders of
leading financial
institutions. All these have
become so routine that
there is hardly any ideologybased
contrarian view. In
India, public sector banks
dominate the traditional
businesses of deposits and
advances. Foreign banks,
either because of the
licensing policy or any other
reason, remained niche
players, even though some
of them have had a presence
in India going back to the
19th Century. That kind of
history very few public
sector banks can match.
In the liberalisation era,
beginning early 1990s,
foreign banks led by Citi
discovered their mettle as it
were. Citi especially
channelled its well
recognised aggression into a
slew of new products and
services that enabled it to
grow at a fast clip. Along
with such dynamism, came
a seeming contempt of local
rules and regulations. Citi,
more than any other bank
was quick to spot loopholes
in regulations and profit
from the resulting
`arbitrage'. Just two
examples will suffice.
Without operating a
sufficient number of
branches, Citi has
aggressively built-up a large
share of banking business
through its wholly-owned
non-banking finance
companies (NBFCs).
Second, during 1991-92,
Citi was an extremely
important player in offering
treasury related products to
customers. Although these
were held to be part of a
scam, Citi and a few foreign
banks though mentioned by
the Joint Parliamentary
Committee (JPC) as the
principal players were left
untouched. It is not
surprising that Citi has had
several run-ins with
banking regulators in many
countries at different points
in time.
C.R.L.
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