US officials to look into India scandal

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NEW DELHI (Reuter) - A team of officials from the New York office of the US Federal Reserve will arrive in India this week to look into the alleged involvement of American banks in India's worst financial scandal, a US embassy spokesman said.

He said the Federal Reserve team will be the guest of India's central bank, the Reserve Bank of India (RBI), but there were no other details.

The team will also meet executives in Bombay, Press Trust of India reported.

Standard Chartered Bank has filed suits against Citibank in New York and Bombay to try to recover dollars 40m it claims it is owed by Citibank in a series of securities transactions.

Standard Chartered has made a provision of pounds 100m against the possibility that money outstanding in the Bombay stock exchange scandal will not be recovered.

The PTI news agency said the Fed team will be in Bombay on December 13 and 14. It will meet RBI officials, including the members of the RBI committee that investigated the dollars 1.2bn stocks and securities scandal.

Standard Chartered has filed 24 cases against five banks to recover 6.5 billion rupees it said it lost in the scam.

The RBI says bankers colluded with brokers to divert money from the interbank securities market to pump up the Bombay Stock Exchange, often using fraudulent commercial paper.

The Bank of England said it had not sent a similar investigatory team to India to look into the involvement of Standard Chartered, which it supervises from the regulatory point of view.

But earlier this year RBI officials visited London to brief the Bank and talk to Standard Chartered.