The Reserve Bank of India (RBI) today issued a showcause notice to Citibank India for the Rs 400-crore fraud by one of its employees at the bank's branch in Gurgaon. According to sources, if the bank failed to provide a satisfactory response, it may be fined as much as Rs 65 lakh.
Sources, however, said the penalty could be reduced, depending on the bank's response to the showcause notice. Citibank declined to comment on the issue.
In December, Citibank had discovered a fraud, allegedly committed by its employee, Shivraj Puri, by siphoning off Rs 400 crore by selling financial products not authorised by the bank. Puri was believed to have transferred the funds to his personal accounts. The accused had reportedly forged the bank's documents and letter heads to sell the products.
Citibank said it informed RBI and investigating agencies as soon as it knew about the financial discrepancies at its Gurgaon branch. Currently, it is in the process of compensating clients hit by the scam.
Analysts say while the quantum of the penalty is unlikely to have any impact on the bank's financials, it indicates the central bank would not tolerate lapses in risk management and internal control systems.
RBI had, earlier this week, penalised 19 commercial banks, including the country's largest lender, State Bank of India, for mis-selling derivative products to clients. The regulator imposed a fine of Rs 5-15 lakh on these banks, since they did not comply with its instructions on derivative products. The list included seven private banks and 11 foreign banks.