Standard Chartered Under RBI Lens Over Derivatives Sales Lapses

Reserve Bank of India (RBI) is scrutinising Standard Chartered after lapses were found in the sale of derivatives and issues in the bank’s risk controls. The regulator flagged concerns regarding the processes used by the London-based bank following sales to small and medium-sized enterprises of target redemption forwards, a product that can result in significant losses. The buyers of the contracts were not informed adequately, Bloomberg reported, citing sources. 

The London-based bank, however, said the check by the regulator is an annual routine exercise. 

“The RBI conducts annual inspection of banks. While we don’t want to comment on specifics, observations, if any, are highlighted and addressed as part of normal process,” Bloomberg reported, citing a Standard Chartered bank spokesperson.

The development comes around a time when IndusInd Bank and its top executives have been under radar of multiple regulators in India for accounting lapses in its derivatives portfolio. 

Additionally, the RBI has reportedly raised concerns regarding Standard Chartered’s maintenance of reserves and the accounting treatment of forward rate agreements in previous financial years.

The London-based bank has been operating in India for more than 165 years and is one of the oldest foreign banks in the country, the lender mentioned on its website. Presently, it runs operations via a network of 100 branches across 42 cities, and key operations include corporate and investment banking and wealth and retail banking. Additionally, the bank expanded its presence in India’s GIFT (Gujarat International Finance Tec) City. 

“GIFT City represents a transformative milestone for India’s global financial ambitions. We will continue to strengthen our capabilities, invest in talent, technology and infrastructure, to deliver best-in-class financial solutions to our clients,” MD and Head, Strategy, Process, Governance & Subsidiaries, Standard Chartered Bank, India, Sachin Shah had earlier said.