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.
When transferring money through NEFT, RTGS, of SWIFT. if you input the beneficiary account number wrongly, then money goes to someone’s account and it is difficult to get back the amount.Pl read this article. Better way is to test transfer a small amount.
When you transfer to the wrong account
It’s not as simple as asking your bank to reverse the transaction
Your salary’s in, and you set about transferring some money online to your parents. You owe your friend money or want to make a hotel reservation and choose the NEFT (National Electronic Funds Transfer) route.
Once you punch in the required numbers and hit the final confirm button, the amount is transferred seamlessly through NEFT. But horror! If you inadvertently typed in the wrong account number or put in the wrong IFSC code of the bank branch in which your recipient’s account is held, it will land in someone else’s account. What now? You can just ask the bank to reverse the transaction, right?
Sorry, no! That cannot be done. What’s worse, the ‘wrong beneficiary’ is not obliged to return your money.
What to do:
So, here’s what you have to do. First, the legal position. The Reserve Bank of India has clearly indicated that the transfer of funds electronically depends entirely on the account number. Unfortunately, the beneficiary’s name has little relevance in the online transfer process. The trouble with wrong beneficiary names arises later. Now, you can be confronted with three different situations.
One, if you punch in an account number which does not exist, the amount will automatically come back to your account. In case of any delay, your bank branch can help quicken the process.
The second situation is if you type in the wrong account number and the (unintended) beneficiary’s name is different from the one you actually wanted the amount to be credited to. Approach your bank branch and prove to them that the beneficiary’s name is different. The bank will then contact the other account holder and ask for the amount to be returned as there is strong evidence of erroneous transfer.
The third situation arises when you type the wrong account number and that (unintended) account belongs to a person with the same name as the intended beneficiary. In this case, it is a tedious process as you will have to prove the transfer itself to be wrong.
Note that the bank is not allowed to automatically take that amount away, even if it is a case of incorrect transfer. Barring the first case, in the other two situations, your bank can only play the role of a facilitator.
The situation becomes increasingly complicated if your bank and your beneficiary’s banks are different, and/or are in different cities, and so on.
Your bank can help by giving the contact details of the accidental beneficiary’s bank and help you connect with the branch manager.
But you will have to do all the work in requesting reversal of transaction. This can include you having to personally request the unintended beneficiary to transfer the money back to you.
In case the IFSC code is wrong, then too, you and your beneficiary will have to coordinate between multiple banks to settle the issue.
Banks normally ask you to type the account number twice; if you happen to commit a mistake in typing, the mismatch in the two numbers will not allow you to proceed further. So, there’s your first level of precaution.
Then, if the IFSC code is correct, it will ensure that the intended bank and branch are at least coordinated. If you want to transfer a large sum of money online, you can do a ‘test’ transfer.
So, first transfer a small amount of, say, ₹50 and check with the beneficiary if the amount has been received. Once you receive a confirmation, you can then safely transfer the rest.
And the simplest of rules to follow goes without saying. Double check the digits after typing!
Thanks – Roshan Pastakia
Seven years after he settled a loan, a borrower is being subjected to numerous calls, notices and even arrest warrant. The only mistake, he committed was not to collect the NOC and account statement from the lender after his settlement
Mumbai-based trader Ramnik Patel (name changed) was happy and relieved when in 2007 he repaid Rs58,000 to ABN AMRO Bank as full and final settlement against his loan outstanding. Seven years down the line, he is receiving calls from recovery agents, and notices from lawyers and warrants from places located thousands of kilometres away from Mumbai. He is not only disturbed, but feels like being mentally tortured just because a small mistake committed by the bank while updating its record.
Interestingly, Patel never received any notice, memo or any warrant for his arrest from anybody until the phone call from Choudhary. Patel, then asked his lawyer to send reply to all concerned, including one lawyer called S Gupta from Delhi and police stations at both Delhi and Mumbai.
Despite directions from RBI, banks refuse to share details of the entity sending money through NEFT
The National Electronic Fund Transfer (NEFT), used by almost everyone to transfer money quickly, can also put the receiver in a difficult position. The main reason is, there are no details available about the remitter or sender and if the amount is large, then the recipient may end up facing Income Tax (I-T) Department queries. Remember what happened with Aishwarya Rai, when in 2006 she received a parcel containing 23,000 euros (around Rs14 lakh at that time) sent by an unknown person from the Netherlands?
Well, with banks hesitating in sharing details of the person or entity who is transferring money via NEFT, it may be you next time. Although the Reserve Bank of India (RBI) has directed banks to furnish appropriate details in passbook or account statement for credits sent and received by the customer through NEFT, all the recipient gets is just a name and amount. “A very generic mention as ‘NEFT’ or ‘NECS’ does not help customers in identifying the source of credits, particularly where multiple credits are afforded to their accounts through these products. The Core Banking Solutions (CBS) of banks should be enabled to capture complete information from the relevant fields in the messages, data files which can be displayed to customers when they access their accounts online or provided to them additionally when they approach the branch counters, help desks, call centres,” the RBI had said.
However, all the recipient gets to know is just a name. There are no details like sender’s PAN number, address and the cause/remark for the money transfer.
Often money launderers are found using bank accounts of low-income individuals for transferring money. In addition, due to the forceful implementation of the Jan Dhan Yojana, we have about 10 crore new bank accounts, out of which 73% do not have a single penny. But consider that tomorrow, if somebody uses these accounts to launder money, then without detailed information about the remitter, how is a poor Kalawati supposed to answer queries from the authorities, including but not limited to I-T department. In the absence of detailed information about the remitter, how will she explain the unaccounted money remitted into her account through NEFT?
Receiving funds from unknown remitters becomes an even bigger issue for non-governmental organisations (NGO), who need to give a receipt as well as I-T exemption certificate. If there is just a name of the remitter, how and where is an NGO, like Moneylife Foundation, supposed to send the receipt?
Another issue with NEFT fund transfer is the delay. According to RBI policy, banks need to afford credits to beneficiary accounts or return transactions (uncredited for whatever reason) to the originating / sponsor bank within the prescribed timeline. It also directed banks to move towards hourly settlement starting from 9am to 7pm on all week days and between 9am to 1pm on Saturdays. Yet, it appears that banks are still using the last part of the work-day or first hour of the next day for NEFT transactions.
Coming back to the Aishwarya Rai episode, the actor was grilled by the Customs official for two-and-a-half hours at the international airport as soon as she landed in Mumbai from Jodhpur. The parcel was allegedly sent by one Avineshwar from the Netherlands marked to the actress. It arrived at the Foreign Post Office in Mumbai during September 2006. Besides the currency, it also contained a top-brand shirt, a pair of binoculars, a DVD player and other electronic items. Following a notice, Aishwarya’s father Krishnaraj Rai, on 15th November met Custom officials to clarify her position. However, the officials insisted to know details from Aishwarya, due to which the actor had to come to Mumbai to clarify her position. She was shooting for the movie ‘Jodha Akbar’ in Jodhpur at that time. After the enquiry, she was give a temporary clean chit by the Customs.
Therefore, it is high time the central bank issues another order mandating banks to share all details of the remitter who is sending money through NEFT or any other payment method to the recipient and actually penalises banks if there are persistent complaints about flouting the RBI’s order.
Courtesy : MoneyLife Foundation