Union Finance Minister, Pranab Mukherjee on Wednesday ruled out any systemic failure in the alleged Rs. 400-crore fraud at the Citibank and noted that regular precautions were being taken.
“There are regular regulations and all other precautions are being taken. But if there is an individual misdemeanour, that has to be acted on. Law will take its own course of action,'' Mr. Mukherjee told journalists here.
The alleged fraud was detected at Citibank's Gurgaon (Haryana) branch. An FIR for cheating and forgery against a bank employee and three others was lodged and 18 accounts having close to Rs. 4 crore were frozen on Tuesday.
The fraud is said to be the handiwork of Shivraj Puri, a relationship manager at the branch. He allegedly sold investment products to high networth clients claiming that they would generate unusually high returns.
It is alleged that Mr. Puri, who is named in the FIR, showed a forged notification of the Securities and Exchange Board of India for obtaining funds from customers.
He also allegedly routed the fund garnered from HNI (high networth individual) customers to stock market through brokerage firms such as Religare Securities. He is accused of claiming that these products were authorised by the bank's investment product committee.
A Citibank India spokesperson said: “We immediately reported the matter to all the relevant regulatory and law enforcement authorities. Identified suspicious transactions have been isolated and we are providing full assistance to the authorities in their investigations. We recently initiated an investigation into a certain set of suspicious transactions based on documents forged by an employee involving a few accounts in our Gurgaon branch.”
The bank said the issue did not impact other accounts or transactions or customers of the bank.
Meanwhile, Religare said Mr. Puri was a client with its broking business in his individual capacity since June 2009 and all the KYC (Know Your Customer) formalities and other due diligence were followed.
