Chapter 7D: one old Citibank playbook is to merge, demerge, name, rename … back to where you were. And it is all cleaned up.
The HDFC Bank takeover by HDFC Ltd was a classic Citibank playbook. It had been perfected after the 2008 meltdown.
When the bank collapsed. There was a branch of a foreign bank. And there was a wholly owned subsidiary called Citicorp Finance India Ltd. This was a NBFC. In addition there were a plethora of licenses. Category 1 merchant bank. Custodian license. And many more. Most in other names. Like HDFC Bank.
Crown Jewels were sold. And these included the technology companies like iFlex. And assets like NSE and even HDFC. Anything and everything was for sale. And sold. But how do you sell something that you don’t own. And what do you do with other people’s assets which are in your custody. And no one owns.
It is quite hard to sell benami property. It is easier to pocket benami assets with you.
They did all.
And this is what saved Citi
Not in India, but globally
The hdfc treasury may or may not have helped.
Now when it was all done and dusted, they had an accounting mess on their hands. The way out was to dissolve the company and let bygones be bygones.
Merger was not the need of the business. It was the need of survival. Once the entity is dead and the dead body dispensed with, then all is well.
Citicorp Finance India Ltd and HDFC Ltd were an identical playbook. Here is what was done in Citicorp.
A chawri bazaar company with a similar date of incorporation was located and acquired. And then through a highly complex web of operations – Avco Finance of Chawri Bazaar became Citicorp Finance India Ltd of Bandra Kurla Complex. The post dated cheques in inventory were encashed. It is as if nothing had happened.
The main NBFC was murdered and buried. And in its place another was resurrected. With the same name. Court orders validated everything. One judge in one court is all it took.
And the baggage of the dying man was gone. And a new healthy person had taken its place.
And no one realised.
Till one income tax officer suddenly said the PAN numbers don’t match and the CIN numbers don’t match. That is when all hell broke loose.
The matter reached Delhi High Court. The judge announced in open court “Citicorp will all be in order” and the matter was dead. The counsel explained that CiN number and PAN number change was a really minor issue. And the judge scampered to agree.
And now you have HdFC with exactly the same playbook. The Chairman highlighted this gently. No one picked up the cue.
But 100% marks to Atanu Chakravarthy for having the gumption to say so.
The three key points from the interview:
– merger was neither desirable nor successful. The key question – who pushed the merger and why ?
– punishment cannot be a replacement for prevention. What could have been prevented was not.
– the regulator is helpless. The bank is too big to fail.
#347
2026