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The Citibank fraud, credulous investors and larger questions..

Yes, the local media is having a field day..
There are 2 things that strike me as funny.
1. Mr Sanjeev Aggarwal, who filed the complaint, is a VC in the board of a leading VC fund, Helion Ventures and a successful entrepreneur. One wonders; how did he of all persons get suckered into something like this?
All investments carry a risk and a return- when someone promises you unnaturally returns on a “safe” investment- even a child knows that it is not possible. No one, nothing violates this simple, elementary principle of investments. Risk increases with returns.

And, if someone came to me with a scheme that is “being offered ONLY in this branch of ONLY Citibank”.. phew! How on earth did Mr Aggarwal even believe this? Would Mr Aggarwal believe a business plan like this from one of his investee companies?

2. The larger question of relationship managers being let loose on unsuspecting investors- I firmly believe this menace is not limited to Citibank. The relationship manager in my bank (not Citibank) does little better than scan brochures and email to me and is absolutely incapable of explaining any financial terms contained therein. So, folks like us are at a mercy of relationship managers who are smooth talkers but have no expertise (at best) or hungry to make money for their employers (the next worst) by pushing any scheme they can or (the worst type) like the folks who run their own Ponzi schemes – like the relationship manager from Citibank was allegedly doing.

The banks should have inviolable guidelines before hiring and letting loose these relationship managers on us. I have fired mine; she does not know it yet!

The police case where Pandit has been named may not hold against him personally- but, it is having the desired effect of getting publicity for the case. Citibank made a profit last year of around 600 Crores in India- a 300 crore fraud is something they can ill afford; especially since the RBI guidelines apparently specify that in cases of frauds like this, the bank has to make good the loss to investors.

Helion MD’s FIR names Citi CEO Pandit.


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