Citizens' Issues
Public Interest Exclusive
The Real Story of how HSBC Was Made To Pay

How a proactive RBI forced HSBC to partly redress glaring mis-selling by HSBC to actor Suchitra Krishnamoorthi. Will this set a precedent? Don’t bet on it

On 14th March, the Hongkong & Shanghai Banking Corporation (HSBC) suddenly called actor Suchitra Krishnamoorthi to discuss a settlement to close her long-pending allegation about gross mis-selling that had caused her a loss of over Rs1.85 crore.

Despite letters to Naina Lal-Kidwai, the high-profile head of HSBC, and legal notices to the Bank, she had come to a dead end. All that the Bank had offered was to waive its charges and commissions and re-invest her money in the hope that they will earn some more revenue. Clearly, this was unacceptable. She had filed a complaint with the banking ombudsman, but without any effect.

In early April 2012, she approached Moneylife Foundation, a not-for-profit organisation, of which I am a founder-trustee. We studied her case and, on 13 April 2012, I emailed Dr KC Chakrabarty, deputy governor of the Reserve Bank of India (RBI), with copies to chairmen of the Securities & Exchange Board of India (SEBI) and the Insurance Regulatory Authority of India (IRDA), secretaries in the finance ministry, Naina Lal-Kidwai and others, about her issue.

Under the guise of ‘managing her wealth’, the Bank had systematically looted her of nearly Rs4 crore through multiple financial instruments. It sold her two toxic unit-linked insurance policies (Rs15 lakh and Rs20 lakh) with a fake assurance of high guaranteed returns on which she incurred huge losses.

In 2007, when she wanted to withdraw funds to buy a house, she was persuaded to take a home loan of Rs1.65 crore to get tax benefits on the claim that monthly instalments could be paid out of investment income. Instead, HSBC relentlessly churned her portfolio to extract income for itself as commissions and entry-/exit-loads. If that wasn’t bad enough, she ended up with a fat short-term capital gains tax because HSBC sold some investments in less than 12 months. Many investments were volatile or underperforming equity schemes rather than debt or liquid funds that were more suited to her profile. So, she paid home loan instalment of Rs2 lakh a month while the Bank relationship managers were busy juggling 38 schemes in her portfolio to keep adding to her losses. She, finally, sold a piece of land to pay off her home loan.

The IRDA chairman’s office was the first to respond to my letter on 16 April 2012 asking for details of her insurance policies. But it merely acted as a post-office, passing on HSBC’s and Tata AIG’s response that the policies were closed.

We calculated the loss due to the churning of her mutual fund portfolio at over Rs29 lakh and suggested that she should file a complaint with SEBI. Although RBI did not send a formal response, the case was examined at various levels. We were also convinced, at that time, that a complaint to the banking ombudsman would be of little use, since its scope is very limited. We requested Dr Chakrabarty to take up the issue of mis-selling of third-party financial products by banks. Meanwhile, Ms Krishnamoorthi  filed a complaint with SEBI which she relentlessly followed up with Mr RK Padmanabhan, executive director, SEBI.

In April 2013, Moneylife Foundation held an open house meeting with Dr Chakrabarty which was also attended by the entire top brass of RBI’s customer services division as well as the banking ombudsman (BO) and chairman of the Banking Codes & Standards Board of India. We gave Ms Krishnamoorthi a platform to make a public plea that day.

The RBI was sympathetic and Dr Chakrabarty was especially vocal about his personal view that banks should not sell third-party products. But it needed information to make HSBC pay. R Gopalakrishnan, counsellor of Disha Financial Counselling (a former deputy general manager of the RBI customer services department), stepped in, examined her case and marshalled all the legal and technical points in a two-page note for RBI.

While HSBC held a standard sweeping power of attorney (POA) executed by her, it had omitted to “prepare a financial plan based on the risk profile, resources available and mapping of financial goals as specified by the customer” or do an annual review which was part of the deal. Also, while Ms Krishnamoorthi had blindly signed some letters authorising investments, debits and credits to her account, it had failed to do it in every case under the terms of the agreement. Clearly, the bankers who were recklessly churning her funds were careless.

The end result after five years was a direct loss of Rs83 lakh from investment, Rs28 lakh in HSBC commissions to HSBC, Rs18 lakh from decline in value of two insurance policies, Rs4.5 lakh tax paid on redemption of short-term mutual funds (including Rs1.85 lakh penalty to the income-tax department due to non-disclosure of gain by HSBC to the client) and Rs58 lakh interest on home loan earned by the Bank.

Helpful RBI officials went out of their way to have several interactions with SEBI’s extremely proactive executive director RK Padmanabhan. Both regulators were convinced that Ms Krishnamoorthi had been cheated. SEBI issued a hard-hitting show-cause notice on 1 November 2013, quantifying the loss at over Rs27 lakh and investments that were completely out of line with the risk profile of the customer.

It classified this behaviour as an unfair trade practice and a violation of the code of conduct of mutual fund intermediaries. SEBI’s order threatened not only disgorgement of ill-gotten earnings but also to debar HSBC from the capital market and from buying and selling securities. Yet, HSBC managed to drag the case until March 2014 by seeking more time.  

Meanwhile, RBI suggested that she file another case with the BO, which she did, in January 2014, but was rejected instantly on the grounds that it was out of the purview of the BO scheme. Things were beginning to look rather bleak then, but again, following requests from Moneylife Foundation, Dr Chakrabarty granted Ms Krishnamoorti another personal hearing and RBI’s customer services department held several meetings with HSBC officials and Ms Krishnamoorti.

By then, pressure on the Bank from both regulators had mounted to the point that it began to talk about a possible settlement. It was also running out of time and options with SEBI which seemed disinclined to accept its explanations.

So, suddenly, on 14th March, Ms Krishnamoorti received a call from the Bank offering a settlement. We suggested that she insist it should be wound up in a single meeting and that she goes with someone whose presence would give her a psychological advantage. Fortunately, Shekhar Kapur, the well-known director and her former husband, accompanied her. We learn that HSBC began by offering half the ultimate settlement, but when it was rejected, it doubled the amount, subject to various terms and conditions (a gag-order, that she would not bad-mouth the Bank, all existing cases will be withdrawn and the Bank would not admit to wrongdoing, but make the payment as a gesture).

For Moneylife Foundation, this two-year battle was won because of strong pressure from Dr Chakrabarty and support from senior executives at RBI and SEBI, who closed HSBC’s exit routes. Ms Krishnamoorthi too was willing to keep fighting and not give up, despite the many setbacks. But Ms Krishnamoorthi is certainly not the only victim of banks. In fact, there are many in India and abroad. But, as this timeline shows, it is a tough and uphill battle against large financial institutions. The battle can become easier, if other victims get together to consider class action. In our experience, not everybody has the stamina to fight their battles—if they cannot dump their problem on someone else, people get reconciled to their loss and simply turn more cynical.

Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]




3 years ago

great show ; i respect all those who fight for the truth and against unlawful and illegal acts which benefit one sidedly the banks or any money/share/debt market participants leading to the ultimate disadvantage of the unsuspecting customer / consumer; WE should thank and reward all those who fight for such causes; No doubt there are many many more such manipulations happening today;

[email protected]

SK Sharma

3 years ago

I salute Moneylife to fight for public interest.

SK Sharma

Davesh Manocha

3 years ago

Wow! Excellent work by moneylife foundation and Sucheta.

Ravindran Menon

3 years ago

Kudos to moneylife for the support and resilence in taking up the case of the famous singer. Most of the so called wealth managers exploit the financial illiteracy of the investors and extract huge commissions by selling toxic investment products. You have done an excellent job of fixing a mighty global bank! Keep on the good work.

Prof Ravindran menon
+91 9923431035


3 years ago

Wow ! great to read that ML has helped Ms Krishnamoorthi fight this case & win. It's another example of mis-selling of financial products & negligence of HSBC. Just imagine the plight of a common person who should have faced the same situation ! Congrats to MLF & Ms Krishnamoorthi for fighting HSBC.
Question arises about the ethics in selling financial products, even though we are educated, we are illiterate when it comes to financial products.So, its here that MLF articles,workshops in educating customers is most welcome. Long live MLF & please continue such good work.

Santhana Krishnan

3 years ago

Moneylife & Suchitra, as well as the concerned RBI & SEBi officials deserve to be congratulated.It is high time HSBC is debarred from capital markets and portfolio and wealth management services. At least they should be debarred from adding new clients or additions to the existing funds managed by them. ALL should learn a lesson from the case and should avoid these cheating banks like plague. All may not be lucky of have the contacts and time to recover even partial loss. It is surprising, why the banking ombudsman is not supporting the victim and only the bank, which is the perpetrator of the fraud.


3 years ago

Yes a big battle again won by MONEYLIFE , another customer who was lucky .But the problems will remain and customers will just have to get smarter at signing documents. Two standouts for retail investors is Wealth managers & stock market brokers who churn needlessly .They all have signed documents to protect themselves .I hope we can get RBI &SEBI to be more pro investor , too many crooks in the system


3 years ago

Most people would have given up, considering the obstacles created during the whole process of filing a complainant and subsequent hassles. But it is only because of Suchitra's and Moneylife's persistent follow-up and continuous pressure that the matter got resolved. Congratulations to both Suchitra and Moneylife for their efforts and helping Suchitra get justice for all the wrong done to her. God Bless.

Suiketu Shah

3 years ago

I would request Suchitra Krishnamoorthy to reveal the names of the RM's of HDBC who fooled her 5 yrs ago so people are cautious about dealing with such hard core crooks and cheats whether they are still with HSBC or gone to another wealth management company.


Suiketu Shah

In Reply to Suiketu Shah 3 years ago

I would also request Suchitra K to put up the name of the fraud and cheat RM's of HSBC on so that the public at large can be beware of them

jaideep shirali

3 years ago

Moneylife & Suchitra, as well as the concerned RBI & SEBi officials deserve to be congratulated. In our country, most agreements signed by customers are so one sided that they defy all norms of justice. Investors should firstly not sign forms and cheques blindly, because legal recourse is slow and loaded against the investor. Secondly, investors should not invest in a product they cannot understand. It is far better to get back your money and less returns than lose it altogether. Thirdly, the product must be suitable for you, e.g. senior citizens do not need to invest in pension products. Ultimately, prevention is better than cure.

Rajendra M Ganatra

3 years ago

Compliments for aantastic achievement by Moneylife. The intermediaries routinely identify gullible folks and cheat them.

Best wishes for continued success.

Rajendra M. Ganatra

NAGARAJ Tirumani Vemula

3 years ago

TO: Smt.Sucheta Dalal


I have certain pending issues with
State Bank of India - a gigantic
commercial (banking) institution
which has done injustice to me.
Please respond if you can take up the issues which help people as stated below:-
1) Myself 2)To several people in the society.
I will send the list of issues if you respond.


Moneylife Foundation

In Reply to NAGARAJ Tirumani Vemula 3 years ago

Dear Mr Vemula,

Greetings! Thank you for addressing your issue to Moneylife Foundation.
You may be aware that Moneylife Foundation runs 5 Helplines. Do check out We have a tie-up with Disha Financial Counselling (an NGO) for Banking and Credit related issues. This is FREE, confidential, it is product and company neutral, one-on-one counselling provided by senior bankers with decades of experience.

I would urge you to take up your matter with this Helpline. We have counselling sessions by Disha's experts at our office at Mumbai every Wednesday and Friday from 2:30pm - 5:30pm at Shivaji Park at Dadar, where members receive guidance on their financial matters. You can call or email and book an appointment at a time slot and date convenient to you.

If you are based out of Mumbai, we would urge you to send us an email with more details and supporting documents. We can then print your email and hand it over to Mr Gopalakrishnan, Disha's chief counsellor and former DGM of the RBI and we can take it forward through a telephonic or electronic counselling session, once we receive your email. Thanks.

Warm Regards,
Marlyn D’souza – Moneylife Foundation

Khaja Mohiuddin

3 years ago

This case is an eye opener to private banks and the credit goes to Dr Chakrabarty Dy,Governor of RBI. The selling of products should have clear terms.

Dr Chakrabarty should not be permitted to retire early on his superannuation. he should be retained as adviser to RBI and the Ministry of Finance-Banking Govt of India.

Anita Williamson

3 years ago

Very encouraging to hear of someone successfully taking the banks on and winning the recompense they deserve. In the UK I have been battling with HBOS over a fraudulently sold mortgage while charting my painful, and so far unsuccessful, journey via my blog, Life after Debt at blogspot. I wrote the following piece in exasperation.

Recipe for Disaster

Take three perfectly good financial products,

One non status mortgage requiring no proof of income, a cautious valuation and client equity stake of 35%

One 100% mortgage requiring no client equity stake, a cautious valuation but belt and braces proof of taxable income and affordability

One 80% mortgage, a cautious valuation, belt and braces proof of taxable income and affordabilty offering discounted interest payments for the first two years

Add a large helping of political gain with nauseating proportions of deregulated bankster spin and mix well.

Throwing caution to the wind, allow evidence of income, equity and conservative valuations to float to the top, carefully remove and discard.

Using what is left, re-package as an innovative low risk mortgage product which will take the market by storm

Present finished article to the board in terms of anticipated personal returns and obtain consent to market.

Use highly incentivised bank staff to roll out new product to as many brokers and introducers as possible, turn a blind eye to their methods and pay all concerned on results

Insist all new applications are submitted online by the broker with declaration pages to follow after offer

Provide regulated mortgages of up to a 125% LTV having told brokers that applicants homes will not be valued conservatively and applicants incomes will not be verified.

Have your cake and eat it while watching with detached indifference for the cookies to crumble,

Leave the victims of widespread mortgage fraud to cook in their own juice,

And then, just like HBOS have done with my own case,

Wash hands thoroughly.


3 years ago

Congratulations, Moneylife!!! Beware, large banks and broker firms, customers are woken up now! kindly make an arrangement that this article is widely circulated among masses. Regards.



In Reply to chan 3 years ago

What Ms. Dalal / Team Moneylife has achieved here is a miracle.

And a 'Chamatkaar' must not be confused as a routine chore with predictable outcome.

Sucheta Dalal

In Reply to Nilesh KAMERKAR 3 years ago

Dear Mr Kamerkar

I agree with you. I hope other readers also realise that there are no predictable outcomes in such fights. In fact, many times it seemed frustratingly impossible.
But I do believe that if we all work to keep up the pressure on regulators, we can force them to become more accountable.
IRDA is most shocking. SEBI doesn't care, NO investor has got back money, although SEBI itself has collected crores and crores through consent orders and settlements. That money does not go back to a cheated investor. They did one shady disgorgement for dubious reasons.

RBI is the best of the lot -- we had a receptive DG in Mr Chakrabarty. Earlier, after the global financial crisis and the collapse of Global Trust bank, Dr Y V Reddy had become extremely pro-active. It is such a pity that stalwarts like Dr Reddy, who continue to have so much clout, do not raise their voice for investors and consumers. We would love their support and guidance!

pankaj nagpal

In Reply to Sucheta Dalal 3 years ago

Dear All,
would like to bring in your kind notice of all of you to one more issue which needs attention. Builders asking for illegal transfer money for issuing NOC to banks for sanction of loans. The demand by builders for issuing NOC is only because the banks insist for a NOC from builder and in turn the developer demands cash to give the same. The amount ranges from Rs 500 to 1000 per sq.ft tuning upto 5 lacs and more.I know a developer in Chandivali who is minting money from the NRI Clients mostly based in Dubai . If you support i can ask these investors to stand up and complaint.I am reachable on 8080808081 pankaj nagpal

Getting back to mining targeted coal would be tough!

The new government may take months before the roadblocks to resume full-scale production

We had recently covered various issues relating to the coal production in the country and the enormous difficulties that the exclusive monopolistic producer, Coal India, faces in its day to day activities.  For the fiscal year 2013-14, we have been advised, from time to time, by the coal India and the ministry of coal that we should be able to achieve the target production of 482 million tonnes.

No doubt, one the impediments, in the production, came through the cyclone, Phalin, which not only disrupted actual mining activities, but left a number of mines flooded.  There is nothing one can do against nature's fury.

Coal imports directly and on behalf of clients from international suppliers, at higher prices, have also come in, but these faced unexpected problems as a result of weak rupee.  Imports became costlier than projected earlier!

On the top of these, as though they were not enough headaches, power generators also did not lift the ordered cargo, in addition to which, as usual, we had problems relating to transport clogs at pit heads!  What more can you ask? Railways' supply of wagons, delays in the completion of dedicated corridors etc have put a tremendous strain on CIL.

Actually, the last fiscal production was 452 million tonnes and the supplies have just grown by a meagre 2% to reach 462 mt, thus falling short of the target of 482 mt

It may be remembered that one major problem relating to  the caloric value with supplies effected to NTPC, and which caused the later to hold up payments, got resolved only recently with mutual consent.

Now it is only less than a week away for the elections to commence and no major decision can be taken till the results are announced, which are scheduled by the end of May.

So, everything will be at a standstill; it will probably take a week or ten days more after the new government takes over when major decisions on all these pending issues will be taken, including the reallocation of coal blocks; whether the status quo for CIL would be maintained or new direction given!

This is a crucial time for the country in every way.  It can be only hoped that those officials in charge of mines (collieries) in the country do their very best so that the wheels of the nation can move smoothly.


Weak Yuan, Punctures Carry Trade of Fake Exports

Chinese currency Yuan or Remminbi has been rock solid until recently. This created carry trade of faking of exports, getting in foreign exchange and buying a rising renminbi. Now that the Chinese currency has dropped what happens?

There was one major emerging market currency that was not affected by the announcement of the taper last year. The Chinese renminbi also know as the yuan has never been affected by any move of the US Federal Reserve because it is not fully convertible. It is a creature of the People’s Bank of China (PBOC). While it does fluctuate, the PBOC has let it appreciate steadily since October 2010. That all changed in the middle of February.

Since interest rates in China are higher than other places and the renminbi has been appreciating for over three years, the currency was perfect for a carry trade. Even with all the restrictions, traders managed to buy renminbi and sell dollars. The trade was so large it was distorting Chinese trade figures. In January 2013 China’s exports surged 25%. In the most recent data they suffered a large drop, 18%, the largest in two years. The reason for the distortion has to do with over-reporting of exports in order to bring in more foreign exchange and take advantage of the rising renminbi. Faking invoices to take advantage of what was seen as a one way bet was a national pastime.

Starting in February the renminbi started to drop. It has fallen 2.8% against the dollar before recovering a bit. The general hypothesis is that the PBOC was trying to drive out speculators. Apparently they were successful. It is estimated that there were roughly $150 billion foreign exchange positions betting on the Yuan’s rise at the beginning of February. If the currency fell to about Rmb 6.20 to the US dollar the betters would be exposed to unlimited leveraged losses. It is now trading at 6.21.

Another view is that the PBOC is also trying to manipulate its currency to encourage exports. In theory the Chinese are trying to reposition their economy. They want it to be more dependent on local consumption and not so reliant on exports. But after 20 years it is hard to shut down the export machine. The rise in the renminbi certainly has not helped exports. The fall in exports has certainly not helped since the Chinese economy is already slowing.

It is also a problem that China and other Asian countries are having with their trading partners specifically Japan. Abenomics is the Japanese Prime Minister Abe’s plan to revive the Japanese economy. The most obvious part has been the flooding ofthe Japanese economy with yen, a Japanese version of quantitative easing, though QE on steroids.

The policy has been successful in driving down the yen by 20% since the program started in the fall of 2012. While it has increased profits of Japanese exports the main goal of increasing inflation has been due mainly to higher energy costs. There has also been a cost to other Asian neighbors like Korea, whose exports and even national dish, Kimichi, have been affected.

While last year the yen was the worst performing currency, more recently has been rising. Political uncertainty has increased the yen’s attraction as a safe haven. So despite the best efforts of the Bank of Japan the yen has risen 3.6% against the dollar.

So speculators in the yuan are not the only ones feeling the pain. The most popular and stable trade last year was to short the Aussie dollar, short the yen and go long on China, but all that is now history. Betting on the whims of central banks can be a costly mistake, but with central banks manipulating currencies on a grand scale, it is a sad necessity.

Manipulating currency can also bring about currency wars. The main grumbler is the US. Last October in a report to Congress, the US Treasury Department wagged its finger at China by criticizing its currency intervention. Even though the yuan at that time was at a three year high, the Americans maintained that it would still need a “substantial” appreciation to be near market rates. Since then the yuan has fallen 2% against the dollar. US legislators are proposing sanctions against China.

Of course they are ignoring the fact that the Federal Reserve with its $4 trillion balance sheet and quantitative easing was very successful in manipulating the US dollar by driving it down relative to other currencies. Nor did they mention the problems caused by the program to other emerging markets and the potential havoc that may occur as the program is tapered. So far the taper has ‘only’ wiped 15% off the Indian rupee and 20% off the Indonesian rupiah.

Currency manipulation by central banks appears to be a seductively easy method to stimulate growth. Just flood your economy with trillions, depreciate your currency and your exports have an unbeatable competitive advantage. This growth can be achieved without the messy politically difficult process of real reform. They just add a few zeros to their balance sheets and off they go.

But there are several major problems to this gambit. The first is that other countries can and do play the same game. Uncoordinated currency manipulation can be harmful to everyone. But the real problem is that any monetary program eventually has to stop. It is at that point that the markets take over and we find out the real consequences, which are often far worse than the issues the policies were meant to solve.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)