The Reserve Bank of India on Wednesday sent a missive to the local chiefs of foreign banks that the responsibility for oversight of regulatory and statutory compliance, as well as audit in respect of all operations in the country, will lie with them.

This directive comes in the wake of a couple of serious cases of greedy relationship managers with foreign banks taking their high net worth clients for a ride coming to light in the last few months.

The most prominent case of fraud involved a Citibank relationship manager who floated a fraudulent deposit scheme and promised high returns. The official managed to convince about 20 high-net-worth Citibank customers to park their funds in the scheme.

The RBI has conducted a special inquiry into the Rs 460-crore Citibank fraud case.

Expresses concern

The RBI said in the recent past there have been concerns about the adequacy of regulatory compliance by foreign banks in India. This is on account of Business Heads/ Units reporting directly and being answerable to their ‘Functional Heads' located overseas and not to the Chief Executive Officer of Indian operations.

The central bank has referred to the deficiency in the existing system of regulatory and audit compliance by foreign banks.

It observed that the Indian operations of foreign banks functioning in India as branches of the parent banks generally do not have a separate Audit Committee.

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