For so long, CitiBank was at the centre of a huge blunder. And the mess of transferring $900 million into the account of the lenders. But according to a report by Moneycontrol, of the three people who executed Citibank’s transfer by mistake, two were Wipro employees.
In August 2020, CitiBank was set to transfer USD 8 million to lenders of cosmetics company Revlon. This is because Citibank was acting as Revlon's loan agent. However, it ended up transferring $900 million. When the bank asked the lenders of the cosmetic company to return it some failed to do so. Despite dragging them to court, the verdict was not in Citi's favour. Considering this is a unique case, the court gave a verdict in favour of two lenders, Bridge and HPS Investment. So, these lenders did not return USD 500 million to the bank.
All this while the focus was on Citibank until recently the attention shifted to IT firm Wipro. This human blunder will do a disservice to the company. “While these human errors are common, the magnitude is not, " an IT analyst who tracks Wipro closely told Moneycontrol.
The association of CitiBank and Wipro is over a decade old. In December 2008, Wipro said it was buying Citi Technology Services, the India-based captive provider of IT services and solutions to Citigroup entities worldwide, for $127 million in an all-cash deal. In this deal, Wipro was ensured $500 million of business for six years. A few years later, under a new deal between both parties, Wipro took over the operation and management of CitiBank’s data centre at Meerbusch in Germany. So, this was a fruitful association for both.
At this juncture, everything can be slightly tricky.
At present, CitiBank is fighting the case to get the money back from the lenders. To prevent that case from weakening, there are fewer chances CitiBank will file a suit against Wipro, if they have any such intention, stated a source.
Meanwhile, three senior industry executives said the blame primarily lies with CitiBank as it controls the entire process—right from determining the software from Flexcube, to initiating and approving a transfer.
Meanwhile, the bank is in the process of upgrading their loan operations platform following a review conducted in 2019. The bank added, “While many lenders have recognised the payment was in error and returned several hundred million dollars so far, other lenders have either refused to return or have not committed to return the funds. Those funds have been frozen by court order. We believe the law is on our side and that we will recover the outstanding funds.”