Posted: May 17, 2017 Filed under: Banking
Banks sometimes disregard the RBI circulars and even the pro vision of law, and overcharge consumers or harass them. An aggrieved consumer can fight for his rights and get justice under the Consumer Protection Act.
Case Study: Neelam Pansari had given premises to State Bank of India on lease for a period of five years. Against this, he had also obtained a loan of Rs15 lakh from the bank, which carried interest at 15
% pa.The loan was to be repaid by depositing 87% of the rental earned each month. When the lease expired, it was renewed for another five years, but the bank hiked the interest rate on the loan to 16% pa, compounded quarterly .
Pansari wrote to the bank against this increase. The bank replied that the issue had been referred to the Reserve Bank of India (RBI) and a decision would be taken soon. Meanwhile, Pansari kept paying interest at the increased rate. He later came across a circular issued by the RBI which stated that there would be no change in the interest rate of loans sanctioned prior to November 16, 1990. He informed State Bank about this circular, pointing out that that the change in interest rate was not applicable to him as his loan had been sanctioned on November 5, 1990. Since the State Bank did not respond, Pansari sought a clarification from the Reserve Bank, which confirmed that the revision in interest rate was not permissible.
Pansari pointed out that he had been overcharged Rs 3,01,599.50 due to the increase in the interest rate. Pansari approached the Banking Ombudsman who partly upheld his contention. As Pansari was not happy with the Ombudsman’s decision, he approached the Bihar State Consumer Commission. The bank contested the complaint. It upheld the bank’s contention that while renewing the lease it was entitled to revise the interest rate and also calculate the interest on compound basis with quarterly rests.
Pansari appealed to the National Commission, which observed that RBI had communicated in November 1995 that banks would not be entitled to charge interest at quarterly rests in respect of loans availed for payment of rents of premises taken on lease. The reason for this is that the interest on the loan should not exceed the lease rent. If compound interest is permitted, the expense by way of interest would be more than the income from rent, leaving a landlord in perpetual debt. To prevent such a situation, the RBI has not permitted charging of compound interest for loans against leased premises.
Accordingly, by its order of May 12 delivered by M Shreesha for the bench presided over by Justice D K Jain, the National Commission held State Bank liable for deficiency in service, and ordered it to refund the excess amount of Rs 3,01,599.50 along with simple interest at 9% pa. Additionally Rs10,000 was awarded as litigation costs. Four week’s time was given for compliance of the order, else it would carry 12% interest for the period of delay .
Conclusion: Banks must be service oriented and not harass consumers.
ePaper, The Times of India (B’bay) May 15 2017, Page 5 :
(The author is a consumer activist and has won the Govt.of India’s National Youth Award for Consumer Protection. His email is email@example.com)
Posted: April 15, 2017 Filed under: Banking
National Payments Corp of India (NPCI), which is set up as a Section 25 company under the Companies Act 1956 (now Section 8 of Companies Act 2013), and is seen promoting its Unified Payments Interface (UPI)- based Bharat Interface for Money application (BHIM) app, says it should not held responsible for any loss, claim or damage suffered by the user. What is more shocking are the terms and conditions (T&C)
for the UPI BHIM app from NPCI, which are one sided and affords no protection whatsoever to the end user or consumer.
In its terms and conditions for use of the BHIM UPI app, the company, promoted by 10 banks, says, “NPCI does not hold out any warranty and makes no representation about the quality of the UPI services or BHIM application. The user agrees and acknowledges that NPCI shall not be liable and shall in no way be held responsible for any damages whatsoever whether such damages are direct, indirect, incidental or consequential and irrespective of whether any claim is based on loss of revenue, interruption of business, transaction carried out by the user, information provided or disclosed by issuer bank regarding user’s account(s) or any loss of any character or nature whatsoever and whether sustained by the User or by any other person. While NPCI shall endeavour to promptly execute and process the transactions as instructed to be made by the user, NPCI shall not be responsible for any interruptions, non-response or delay in responding due to any reason whatsoever, including due to failure of operational systems or any requirement of law.”
The T&C of NPCI are not easily available and one needs to search for it. But whatever is stated in the T&C documents, appears completely one-sided. Take for example point 6.2 in the T&C documents, which emphasises that only the user is responsible for any failed transaction or any loss and neither NPCI nor the bank can be held responsible. It says, “NPCI shall not be liable for any loss, claim or damage suffered by the User and/or any other third party arising out of or resulting from failure of any transaction initiated via BHIM App on account of time out transaction i.e. where no response is received from NPCI or the beneficiary bank to the transaction request. NPCI or the beneficiary Bank shall also not be liable for any loss, damage and/or claim arising out of or resulting from wrong beneficiary details, mobile number and/or account details being provided by the User.”
This means, even if NPCI or the bank fails to send the necessary response, it is the user who is liable for the loss. Therefore, NPCI, the developer and promoter of this UPI BHIM app, and banks on its platform, are under no obligation to send responses to these transactions within time. “NPCI shall not be responsible for any electronic or mechanical defect, data failure or corruption, viruses and bugs or related problems that may be attributable to User telecommunication equipment and/ or the Services provided by any Service Provider,” NPCI says.
Remember the Bank of Maharashtra case, where fraudsters siphoned off Rs25 crore from the lender, using a bug in its UPI app? For such kind of misuse, too, NPCI says the payer is responsible. It states, “The Payer is solely responsible for the accuracy and authenticity of the payment instructions issued via BHIM App. Once a payment instruction is issued, the same cannot be subsequently revoked by the Payer. NPCI accepts no liability for any consequences arising from erroneous information provided by Payer in payment instructions.”
Now, let us see what happened in the Bank of Maharashtra case (Read: UPI bug costs Bank of Maharashtra about Rs25 crore
). P Hota, Managing Director and Chief Executive of NPCI, told the Economic Times that the Pune-based bank had procured an UPI solution from a vendor (reported to be city-based InfrasoftTech), which had a bug that resulted in the fund moving out of the accounts without the sender’s account having the necessary funds.
As per the procedure, when the UPI app receives such a request, it sends a query to the other party (customer) and, after obtaining acceptance, it checks fund availability in the UPI-linked bank account. However, the UPI app used by Bank of Maharashtra sent two messages to NPCI, one as ‘success’ and other as ‘error:insufficient funds’. In these fraudulent transactions, NPCI only read the first message and cleared the payment.
This is an interesting situation because the money was taken from accounts which did not have necessary funds. So, who will bear the loss? As per NPCI’s T&C, it cannot be the company or the bank, but the user. However, in this case, the user was not even aware about this fund transfer. In addition, NPCI is not under any obligation to keep a record of instructions, making the job of the investigation agencies difficult.
In its T&C documents, NPCI states that it has no liability or obligation to keep a record of the instructions to provide information to the user or for verifying the instructions. “All instructions, requests, directives, orders, directions, carried out by the User via BHIM App, are based upon the User’s decisions and are the sole responsibility of the User,” it says.
After making claims that over one crore users have downloaded the BHIM app from Google Play Store, the government is now trying to boost its actual use. The government has come out with a customer referral scheme
, which promises to pay Rs10 per reference to the referrer and Rs25 for the new user for downloading and transacting from BHIM app. But this will happen only on completion of three unique transactions of Rs50 in total to any three unique customers or merchants.
Posted: April 7, 2017 Filed under: Banking
Should citizens be expected to read the fine print every time the prime minister makes a public promise?
The Indian government’s top legal officer told the Supreme Court on Tuesday that Prime Minister Narendra Modi’s promises made in an address to the nation don’t matter if his government doesn’t stick to them in the legal notification that follows. The court was questioning the government’s decision to close the window allowing all people to swap older Rs 500 and Rs 1,000 notes in the aftermath of Modi’s demonetisation announcement on November 8, 2016.
“If the PM has made the announcement in television that deposit can be done till March-end next year  but subsequent law says one can’t do so, the law will prevail but not PM’s statement,” said attorney general Mukul Rohatgi in court, according to LiveLaw.in.
Modi, in his November 8 announcement, said that everyone would be free to deposit their old notes in local banks until December 30, 2016. Following this, those who are not able to deposit their old notes for whatever reason “can go to specified offices of the Reserve Bank of India up to 31st March 2017”.
When the government issued an ordinance, however, it prohibited most Indians from being able to deposit their older notes after December 30. The only people permitted to still do so until March 31 are Non-Resident Indians and citizens who were abroad between November 8 and December 30, 2016.
This left a number of people in the lurch, prompting the filing of several Public Interest Litigation suits asking how the government could go back on its decision after the prime minister promised the window would remain open. The Supreme Court has now given the government until April 11 to submit a detailed explanation of why it decided to shut the note-swap window ahead of time.
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Posted: March 26, 2017 Filed under: Banking
Karthik Srinivasan, a Digital Marketer from Bangalore was going through his email when he discovered that HDFC Bank had been charging him Rs 100 per quarter for a program he never signed up for.
On delving deeper, he discovered that the service was an opt-out program that had been activate for his account without his express consent. Worse still, the opting out requires a member to actually read their spam-like banking emails, from top to bottom, discover the fine print that states that the offer is an opt-out one and then click on a link to opt-out of the service.
But what’s Rs 400, right? That still doesn’t equate to hundreds of crores of rupees.
Rashmi R. Padhy took to Medium to break down why the money is real and why this is indeed a scam.
Pointing to VAS (Value-Added-Service) fraud that was prevalent some years ago, Padhy notes that telcos used to offer VAS as “free” trials. After the trial was over, these telcos would charge you for the service and keep doing so until you opted out.
The value of the transactions was small, but scaled up, the telcos likely earned in hundreds, if not thousands of crores. The rising number of complaints caught the Telecom Regulatory Authority of India’s (Trai) attention and the practice was halted.
HDFC Bank appears to be doing the same thing. The bank essentially upgrades you to a free Classic / Preferred Banking trial program without your consent and then charges you Rs 100 — plus service tax — per quarter till you opt out.
Since most people would not read the mailer that explains all this and since the price isn’t placed up front, most people will not opt-out because they simply don’t know.
Padhy breaks down the calculations as follows. Charging 1.2 Cr customers a fee of Rs 400 a year, HDFC is set to earn upwards of Rs 400 Cr a year. For free, without the explicit consent of its members.
The calculation may not be as cut and dried as Padhy puts it and the numbers might be much lower. This doesn’t, however, change the fact that the program is inherently fraudulent. And other banks might soon follow suit, if they haven’t already.
As heinous as the practice might seem, it is currently perfectly legal for it to do what it’s doing.
Most people may not even be aware of the service or the charge. A charge of Rs 400 a year can easily get lost in the tens of thousands of transactions that we perform every year. And how many of us actually peruse through our monthly bank statements in that much detail anyway? Many more of us probably delete bank mails the moment they arrive in the first place.
Srinivasan did not take this charge laying down. On discovering the charge, an average person might simply have opted out, vented a bit on social media and left it at that. Srinivasan is, however made of more Gandhian stuff. As Office Chai puts it, Srinivasan is now on an online ‘satyagraha’ to get HDFC Bank to apologise for trying to scam its customers in such a way.
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Posted: March 23, 2017 Filed under: Banking
Overturning an order of the Maharashtra State Consumer Disputes Redressal Commission, the National Consumer Disputes Redressal Commission (NCDRC) last week termed the refusal of HDFC Bank to hand over cash to a bearer of a cheque, after verifying his credentials through the account holder, as “a clear case of deficiency in service”.
The order from NCDRC, issued on 15 March 2017, states, “No doubt the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the Bank Manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”
The order relates to a consumer complaint filed by Mumbai resident Prakash Sheth against HDFC Bank. Sheth required Rs3 lakh to be deposited in the hospital for treatment of his ailing mother, in 2010. He requested his nephew, Chirag, for the money. Chirag gave a bearer cheque to Sheth, who then presented the bearer cheque on 7 May 2010 at HDFC Bank. The cashier in the bank asked him to come back at 4pm because of insufficiency of funds. When he returned at 4pm, the cashier asked for his photo ID, which Sheth was not carrying. The cashier then called up Chirag to seek verification of issuance of the bearer cheque. Chirag confirmed it, but the cashier refused to honour the cheque and Sheth was asked to meet the branch manager. The branch manager too checked with Chirag to confirm that he indeed had issued the cheque. Despite that, the manger insisted that Chirag should personally come to the bank, which the latter was unable to. The branch manager then refused to honour the cheque.
Claiming this to be deficiency in customer service, Sheth filed a complaint in the Consumer Forum at South Mumbai District, seeking compensation to the tune of Rs1 lakh towards mental agony and physical harassment. Sheth also appealed for a directive to the bank to stop this practice. The bank was served a notice, but it claimed that it had rightly not honoured the cheque as per guidelines from the Reserve Bank of India (RBI). The District Forum therefore dismissed the complaint. Subsequently, the Maharashtra State Commission too dismissed Sheth’s petition, stating that the bank had rightfully adhered to RBI guidelines.
As per RBI guidelines, banks have been advised that “in case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs50,000, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity and address should be verified”.
However, Sheth’s contention was that two officials of HDFC Bank had personally cross-checked with the account holder, which proved that it was a clear case of harassment.
In this case, while the State Commission dismissed Sheth’s petition, it upheld that although Sheth was not an account holder of HDFC Bank, he still was a consumer. The Commission observed “…the consumer is not only the person who hires or avails the services of the service provider but the beneficiary also. It is argued that once the account holder had issued a cheque in favour of someone, he automatically becomes the beneficiary and therefore he is a consumer”.
Sheth then approached the National Commission. In its order on 15 March 2017, the Commission stated “…from the affidavits of Chirag Natvarlal Sheth and Prakash Sheth (the complainant), it is amply proved that the bank telephonically contacted Chirag Sheth twice to verify whether or not he has given bearer cheque to the complainant and the account holder Chirag Sheth confirmed the said fact. From the above, it is clear that the bank officials were categorically informed by the account holder that he had issued the cheque and given it to Prakash Sheth. Therefore, he, in our view, was the beneficiary of the cheque and as such he is covered under the definition of consumer, which includes the beneficiary of the service hired or availed. Thus, the complaint is maintained.”
The NCDRC also pointed out that in response to an application under Right to Information (RTI) filed by the bank, a part of the response clearly states that, “the bank should not ordinarily insist on the presence of account holder for making cash withdrawals in case of ‘self’ or ‘bearer’ cheques unless the circumstances so warrant. The banks should pay self or bearer cheques taking usual precautions.”
“From this it is evident that Reserve Bank has cautioned banks in the country to be careful while encashing the bearer cheques if the amount exceeds Rs50,000 and insist on the verification of ID, as also the address. No doubt, the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the bank manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”
Another rule from RBI states, “In the event the individual tendering the instrument is not carrying the identity, and there is urgency to pay, the transaction to be referred to the branch manager. The branch manager shall make appropriate enquiries as deemed fit and shall use his discretion to allow the transaction. Such discretion to be used judiciously as strict one- off cases, only upon satisfactory confirmation of the bonafides of the transactions.”
The National Commission declared HDFC Bank’s stance in not honouring Sheth’s cheque as ‘deficiency of service’ and asked it to pay compensation of Rs10,000 to him for harassment and humiliation.
Prakash Sheth says, “Most banks harass such non-account holders who come with bearer cheques. Mine was perhaps the first challenge before a legal forum. This case will spread literacy amongst consumers or bearer cheque holders, and will hopefully be a lesson to similar banks who adopt this malpractice.”
Posted: December 10, 2016 Filed under: Banking, News - Miscellaneous
Prime minister (PM) Narendra Modi’s mega campaign to go cashless may, in the long run, lead to transformation like his much-needed Swachh Bharat initiative. We are a cash-based economy; over 68% of transactions happen in cash and the push to get, at least, urban, educated Indians to switch to cashless payments is necessary and long overdue. Starting with his radio talk (Maan ki Baat), the PM’s slogan of ‘My Mobile, My Wallet, My Bank’ has been amplified by leading bankers, e-payment companies, Union ministers, NITI Aayog officials and high-profile bureaucrats. But people won’t change just by being shoved in a particular direction. Moreover, in the short run, the pain in accessing one’s own money is very real. The government needs to work harder to make the switchover easier, by providing adequate infrastructure (telecom coverage, Internet connectivity), safety and ease of transactions and proper grievance redress. Unfortunately, the effort to push e-payments seems driven by the need to hastily correct the massive failure of currency management after demonetisation, rather than a genuine desire to bring about a paradigm shift. Let’s look at a few decisions that are urgently needed to ensure that the switch to cashless transactions is both, safe and permanent.
1. Beneficiaries Must Pay: The first step is to encourage and incentivise e-payments by scrapping ‘convenience’ charges and transaction charges. So far, it has been a sellers’ market. So ticket booking agents (makemytrip, cleartrip, etc, or Bookmyshow) and even principals (Jet Airways) conveniently turned the logic on its head and decided that we, the consumers, must pay for the ‘convenience’ of getting tickets online. Airlines used to offer hefty commissions to travel agents who did the hard work of selecting the best route and the lowest fare option; the customer did not pay. Today, there are no travel agents; the consumer does all the hard work of searching and selecting; and also pays for the alleged convenience. We need to ensure that beneficiary companies, at least, share the convenience. But what about movie theatres and airlines which are able to save on ticketing and box-office costs? This is the best time to do it because they need our business at a time when discretionary spending has dried up substantially.
2. Regulation of E-wallet Companies: Information technology experts will tell you that most apps and e-wallets collect a lot of sensitive customer data by seeking omnibus permissions from not-so-savvy users. According to a report by medianama.com, leading payment apps get access to your Internet history, bookmarks, and even really sensitive data such as IMEI number, saved Wi-Fi network info and the MacID. They record audio info, modify contacts and even use call logs to make calls. Many e-wallets will save credit/debit card details used to transfer money to the wallet without your permission.
This increases the security risks for users, without their knowledge. If the data is hacked, we, as individuals, are in no position to track the source of the leak and we have no access to easy grievance redress either. We need to have clear rules on what information can be collated by apps and their liability spelt out, in case there is a large-scale data breach or even if an individual consumer has a complaint. Will every minister of the NDA government, who is dutifully promoting e-wallets, take up the issue of regulation as well?
3. Grievance Redress: This is an issue that we have been agitating for several years through Moneylife Foundation, our not-for-profit entity involved in advocacy and financial literacy. At a social gathering, recently, a leading industrialist and a retired police chief were narrating interesting stories about how their domestic helpers and cooks had adapted to technology, using it to transfer money to their village in Bihar and Odisha through ATMs.
While this is, indeed, very heartening, it is also a fact that ATM PINs are easily shared with the family because of ignorance. In one case, a domestic helper’s account, which had her precious savings of over Rs70,000, was hacked. The hacker, pretending to be a banker, claimed that the account was being tested to ensure that a link to her mobile phone was working effectively and she should read out the number received in an ATM. The unsuspecting woman ended up giving her OTP (one-time password) six times, until the bank itself noticed something amiss and blocked her account. A well-known consumer activist, who is helping the lady recover her money, related this story to me; how many are so lucky?
As Dr KC Chakrabarty, former deputy governor of the Reserve Bank of India (RBI), told me in a recent interview, “You may push a person to do digital transaction; but once a person has lost money at an ATM or in a digital transaction, he will stay away for 10 years. All over the world, unless the bank can prove that the customer is at fault, his money should first be credited to his account. That is a global rule. This is not yet implemented in India.” The reason for not notifying consumer protection regulations is rather perplexing, especially when RBI deputy governor,
SS Mundra has publicly acknowledged that the increase in online transactions has led to a manifold surge in customer complaints. Addressing a public meeting on 23rd May, he had said that these complaints relate to electronic transactions, unauthorised fund transfers, fraudulent ATM withdrawals using duplicate cards, phishing, vishing, etc. And yet, on 31st August, RBI only issued a draft regulation proposing to limit customer liability instead of notifying formal rules. These regulations propose to shift the onus of proving wrongdoing or carelessness on the part of the customer to the bank. They will also ensure that the money lost is immediately credited back to customer accounts pending investigation. Isn’t it strange that RBI has not been asked to notify these regulations even while a nationwide campaign to go cashless has been launched from the highest office in the land? RBI must also be asked to notify its much-touted consumer charter and take responsibility for its implementation. The charter must prescribe clear penalties for banks’ lapses and amend the banking ombudsman regulations to empower it to initiate stringent action. Instead, an unworkable consumer charter has been put out in the public domain and RBI seems to have no intention of holding banks strictly accountable for treating customers fairly.
4. Financial Literacy: The buck for spreading financial literacy also stops at RBI’s doors. The central bank, as is its style, works at an excruciatingly slow pace on most issues; it is probably the slowest on consumer protection. Two years ago, RBI took charge of over Rs3,500 crore of unclaimed cash deposits that were lying with banks and set up the Depositor Education and Awareness Fund (DEAF). This money could have been put to excellent use today to spread financial literacy using modern tools to spread the message.
Two years later, DEAF has little to show. It took a year to grant accreditation to a few NGOs and another year to sanction small sums to be spent on workshops to a few of them. Worse, DEAF will simply not engage with people in the field. Another effort to reach out to rural consumers under the aegis of RBI and with support from banks is similarly chugging at a snail’s speed. This is not the pace at which the PM operates; but then, why doesn’t someone push RBI to act, or take away these responsibilities and allow it to remain India’s monetary authority? At a time when people are going through enormous hardship to access their own hard-earned money, being pushed into driving along the digital highway without a safety belt will be even more insensitive.
by Sucheta Dalal
Posted: August 29, 2016 Filed under: Banking
Payments get simpler as the much-awaited Unified Payment Interface goes live. Customers of 21 banks can now use a mobile app to make and receive payments through multiple banks, 24 hours a day. AP Hota – MD & CEO of NPCI and Jitendra Gupta of Citruspay share more details on this edition of Startup Central. Tune in.