Date:01/12/2008 URL: http://www.thehindu.com/2008/12/01/stories/2008120150211500.htm

Business

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.