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.
Day 49: Invite-only, they said.
You’ll be charged, they said.
‘Here’s opt-out link’, they hid in email.
If not…! http://bit.ly/UnethicalHDFC
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.
Click Here for the detailed full story
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.
Onus Now On Banks To Make Good Losses
Concerned over the rise in complaints about unauthorized electronic transactions, the Reserve Bank of India has introduced a policy of `zero liability’ for customers in third-party frauds if they are reported within three days. This means banks will have to make good the losses suffered by customers.In cases where the victim notifies the fraud between 4 and 7 days after coming to know about it, the customer’s liability will be capped at Rs 5,000.
In a draft notification issued on Thursday , the RBI said that if a bank employee is responsible for the fraud, the customer must get his money back irrespective of whether it is reported in time or not.
The three-day time limit for reporting a fraud will start from the day the customer receives an intimation about the transaction from the bank. This can be either by way or an SMS, email or statement. This directive puts the onus on the bank to notify the customer of the transaction as soon as possible. The proposed rules will apply to all electronic transactions, including payments made remotely using net banking or cards and payments made in shops using cards or mobile wallets.
If a customer has shared his password or other payment credentials, he will be responsible for any transaction that takes place until the time he informs the bank of his indiscretion. Once he informs the bank, the bank will be liable for any loss that takes place subsequently .
Banks have been told that all complaints have to be resolved within 90 days from the date of reporting and to ensure that customer does not bear any interest cost or late payment fee in credit cards. If there is a reversal of a debit card fraud or net banking fraud, banks have to make good the loss of interest income.
The proposed norms place much more responsibility on the banks than in the past.Existing norms require banks to compensate customer only up to a limit. Also, this limit is left to the bank based on a board-approved customer relations policy .
To make it possible for the customer to report frauds on time, banks have been asked to provide multiple option in cluding website, SMS, interactive voice response systems, a dedicated toll-free helpline and a reporting option at home branch. Banks have also been asked to put in place systems acknowledging receipt of the complaint.
The tightening of norms comes at a ti me when online and mobile payments are growing at 100% and banks and payment companies are lobby ing with the regulator to relax two-factor authentication for low-value payments.
The RBI has been re sisting any relaxation on the two-factor aut hentication (usually a PIN or a password in addition to the card details) on the grounds that the present dispute resolution mechanism was not very robust. By reducing liability of the customer, RBI expects banks to put more robust systems in place.
Public Sector Banks are more strained than ever before, going by the recent Indian Express exclusive which talks on the stressed assets of Public Sector Banks. Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by the government.
Take the following statistics:
- Public sector banks are sitting on over Rs 7 Lakh crore stressed assets.
- Bad loans written off by them between 2004 and 2015 amount to more than Rs 2.11 lakh crore. More than half such loans (Rs 1,14,182 crore) have been waived off between 2013 and 2015.
- Bank-wise break-up shows State Bank of India, India’s largest bank, is way ahead of others in declaring loans as unrecoverable, with its bad debts shooting up almost four times since 2013 — from Rs 5,594 crore in 2013 to Rs 21,313 crore in 2015. In fact, SBI’s bad debts made up 40 per cent of the total amount written off by all banks in 2015 and were more than what 20 other banks wrote off.
The Public Sector Banks have been suffering due to many reasons but some of the important reasons includes:
1.) Lack of Accountability – The decision making board contains representatives of the government and the banks among other stake holders. The decisions are taken arbitrarily without any accountability for the bad decisions taken. Take for instance King Fisher Airlines, SBI who had the biggest exposure among the public sector banks could recover only Rs 155 crore out of the Rs 1,623 crore. The money lost is the money deposited by individuals in SBI among others. There are many other examples where banks have lost money hastily with no one held accountable.
2.) Collusion – A CBI investigation into the Kingfisher debt revealed IDBI had extended loans up to 700 crores despite board members warning them otherwise. Besides IDBI, many of the banks have reached a dead end, total of 7,000 crores have vanished to thin air with no body being held accountable for the same.
What is evident from the above Kingfisher example is that the people who are availing the debts simply wash their hands off besides pocketing a handful from the loans taken themselves. The Banks do their best to recover a part of the bad debt but in vain. The ultimate loss is of the depositor and the government. Since the government has majority stake in many of the banks, it becomes an obligation to re-infuse these banks with funds which in-turn are the tax payers money. What is evident is a structural siphoning off of public money with little or no accountability.
The Most Generous :
The Logical Indian thanks The Indian Express for filing RTI and bringing this information to the public sphere. The Logical Indian is appalled by the spike in NPA (Non Performing assets) and bad debts of the public sector banks. We appeal to the government to make the public sector banks structurally incorruptible and accountable. We appeal to the RBI to set up an investigative body to look into all the bad loans and bring to books the people who had colluded for their own benefits at the cost of public money.