Chapter 13: in 2011, the HDFC and Citi networks were interconnected with the equivalent of a bridge. One that didn’t need to go through RBI interbank clearing or Swift. It was called Diners Club and it ran on a stack called Discover. This was the same stack that powered Rupay.
Diners was a parallel Rupay. HDFC officially took over Diners issuance and management from Rupay to launch Diners Black. It was apt branding. It wasn’t a credit card. It was a charge card pretty much with unlimited transactions. And one that RBI had no means to monitor.
In the U.S., Diners was sold to an unknown entity. Outside of banking regulation. You could go to Happy Valley racecourse in Hong Kong and bet a million dollars on the tote. You got entry to a privileged stand with free food and drinks. American Express had their own Black.
Black was for black money. You could park a million dollars in Citibank Dubai or London. And get a million dollars betting limit in Macau or Las Vegas. And be an Indan National. It was Citis answer to Bitcoin. It wasn’t trustless. But it was trust worthy. For those whose benami accounts had not been usurped to create survival capital for Citibank in 2008. Citi needed a trillion dollars to survive. Essentially all customer deposits everywhere in the world had been lost to gambling. By Citibank. And in creating the real estate bubble that burst in 2008.
These cards marked the rise of Indian spending in Dubai. Foreign remittances were used to buy real estate. Rs 20,000 crores per annum. Money export from India. And transactions which showed up niether in the books of Citibank India nor in those of HDFC. Nor in the books of the card holder. You could buy a million dollar apartment in Dubai.
Dubai real estate companies entered India. Emaar was all over. Building golf courses in Hyderabad just outside ISB. Building the ugly Commonwealth village in Delhi. Shah Rukh khan was dancing in Dubai to showcase Burj Khalifa. Private beaches were being created – artificially !!! By importing sand. Goa was in threat. Dubai was cheaper.
Few realise Dubai has no oil. It is built on money laundering and prostitution. And now the rupee had become convertible. Unknown to RBI. Without their consent. Without their knowledge. It didn’t have marketshare in nos. Only in value. The Mohansingh place havala dealers had competition.
It took the law makers over 15 years to understand what was going on. Something was wrong but what. On papers – everything was in order.
But before that RBI put a ban on HDFC issuing cards. But they couldn’t figure out what was going on. So they withdrew the ban.
Too big to fail.
But alarm bells had rung.