BOMBAY - Citibank in Bombay has formally rejected charges that have linked it to a major Indian financial scandal.
Ravi Bhatia, the Citicorp unit's vice president and director of corporate affairs, 'said the bank had delivered a 16-page page document to the Reserve Bank of India, explaining transactions that were allegedly connected to the $1.2 billion securities fraud.
"As far as we're concerned, everything was aboveboard," Mr. Bhatia said. Citibank's documentation was also sent to a parliamentary committee probing the scandal.
BankAmerica Also Cited
A Reserve Bank report in August, three months after the scandal was exposed, accused the Bombay operations of Citicorp and BankAmerica Corp. of irregularities in securities transactions.
Ram Niwas Mirdha, chairman of the investigating parliamentary committee, has accused the foreign banks of initiating the fraud, in which prosecutors allege that brokers and bankers siphoned money from the interbank securities market and used it to artificially pump up Bombay share prices.
London-based Standard Chartered Bank has initiated a suit in New York against Citibank related to the scandal.
The legal action seeks to recover 1.15 billion rupees, about $40 million. Citibank is contesting the claim, saying it has no liability in the scandal.
Biggest Foreign Participant
Citibank was the biggest foreign player in the Bombay securities market. Between April 1991 and May 1992, it transacted business worth more than 215 billion rupees ($7.6 billion), or 17% of such deals by all banks, according to the report by Reserve Bank deputy governor R. Janakiraman.
Mr. Bhatia said Citibank was being wrongly portrayed as a villain, and he dismissed accusations by prominent broker Harshad Mehta that Citibank had masterminded the scandal.
When Mr. Mehta talked to the parliamentary committee earlier this month, he produced no evidence against Citibank, Mr. Bhatia said. "It's a figment of his imagination."
Mr. Bhatia declined to make available a copy of Citibank's responses to the Janakiraman report, but outlined the contents in an interview.
"Effectively, what we've told them is that whatever issues have been brought up, [the Reserve Bank] did not have full knowledge of them before submitting the report," Mr. Bhatia said. "We did not have the opportunity to respond before the report was published."
Responding to Reserve Bank allegations that Citibank's banker's receipts, or promissory notes issued to pledge delivery of government securities, were improperly formatted and signed by only one instead of the required two signatories, Mr. Bhatia said this was common market practice which had since been rectified.
"No bank was using the required format," he said.