RTI activist Sharad Phadke who successfully pursued a case of his failed ATM transaction which was not credited to his account for 65 days, has now taken up cudgels against bank frauds against small time loan takers. A report…
Radha Nath Singh, a villager in Dhanbad district of Jharkhand was assured a loan of Rs50,000 from Bank of India, Dhanbad. With the first instalment of Rs25,000, he took a shop on rent and spent on its interiors in order to open an auto spares shop. This loan which he took came under the government’s self-employment scheme. However, instead of providing the remaining Rs25,000 to Mr Singh, the branch manager of the bank directly gave the money to a dealer who would supply the required auto spare parts. However, the dealer did not keep up to his promise of supplies. Besides, Mr Singh alleged that the bank manager had committed a fraud by directly paying a third party without his consent.
This spurred Mr Singh to write an official complaint to the bank as well as the dealer but both were mum on this count. Frustrated, he approached the consumer court which directed the bank to refund Rs85,000 as compensation for harassment along with the return of the loan. The bank wrote to the consumer forum stating that a long period has elapsed for this issue (more than a year) and so it does not merit any compensation. Mr Singh then took up the matter with the National Consumer Redressal Forum demanding justice. Shockingly, the forum directed him to refund Rs20,000 and pardoned the bank for its illegal disbursal of Mr Singh’s part loan to the dealer.
This news which appeared in one of the national newspapers caught RTI activist Sharad Phadke’s keen eye and he decided to follow up on whether the dealer returned the Rs25,000 and how much money was spent by the bank as legal fees and others to cover this fraud.
So, Mr Phadke shot off his RTI application last July to the Assistant Public Information Officer (APIO) of Bank of India, Laxmi Road branch, Pune. The RTI application read as follows:
There appears to be huge wastage of public money for pulling an unemployed youth up to NCDRC, who tried to avail small loan for self employment. Thus there is larger public interest involved, when the government is propagating inclusive growth. I therefore seek following information:
1. Total amount of expenses with break-up of legal charges paid to advocates, miscellaneous expenses, money equivalent of man hours of staff, travelling and Diem allowances etc. for contesting this case.
2. Names, designations and places of present posting of officers of bank who recommended or authorized such litigation and expenses thereof. Sec. 4 (1) (b) (iii)
3. Certified copy of all process notes and file notings relating to legal action. As per Section 4 (1) (b) (iii) and bank may use section 10 of RTI Act for segregation by blurring personal information, if need be.
4. Certified copy of policy or board guidelines for such litigation.
[Section 4 (1) (b) (viii)]
5. Certified copy of circulars issued by HO for guidance of administrative offices and branches on litigation in courts, consumer forums/commissions. [Section 4 (1) (b) (v)]
6. Certified copy of process note of appointment of advocates on panel who represented the bank and their opinions held by bank.
7. Details of departmental action initiated by bank on erring branch manager of concerned branch for loss of Rs.27000/- to the bank. In case no action is initiated, I should be made known reasons held on record therefore. Kindly note, as per RTI Act, Section 2 (f) ‘Action not taken on any one is also information.’
8. Name, designation and official address of the disciplinary and controlling authority of the branch manager at the time of disbursement of Rs27,000.
9. Rationale held on record, justifying such legal action on unemployed youth by a government-owned bank mandated to alleviate unemployment and poverty, at public cost. And when there is no law to support direct payment unless you have authority to pay.
10 Details of action taken on recently declared national litigation policy by
Government of India, Ministry of Law
What happened after he filed the above RTI application?
The APIO forwarded it to the Pune Zonal Office of Bank of India. The zonal office in turn send it back to Mr Phadke instead of forwarding it to PIO, Bank of India, Dhanbad (as RTI Act mandates the PIO to forward the application meant for any other department and not return it to the applicant.)
Mr Phadke filed an appeal to the First Appellant Authority (FAA) in the Pune Zonal office who forwarded it to Dhanbad. The FAA replied to Mr Phadke, but the latter alleged that false information was provided to him. So, Mr Phadke appealed to the Central Information Commissioner (CIC) in Delhi who in turn asked the appellate authority in Pune’s zonal office to investigate into the allegations of Mr Phadke of having been provided false information and provide the requisite information before 30 September 2011.
When no information was provided, Mr Phadke again went in appeal to the CIC for non-compliance. Last week, the Central Information Commissioner (CIC) Shailesh Gandhi has directly ordered the Dhanbad branch to provide information by February 2012. Mr Phadke is miffed that besides information exposing the wasteful public expenditure for needless litigation was not coming by Mr Gandhi’s deputy registrar has given an order directly without thinking it fit to penalize the PIO for false information.
So now, Mr Phadke has registered an official complaint to the Chief Central Information Commissioner in Delhi against CIC Shailesh Gandhi asking what authority a deputy registrar of CIC office has to dispose off the case without hearing conducted by Mr Gandhi.
Knowing Mr Phadke’s tenacity to follow up issues, we could have a breakthrough in the case of banks playing illegally with a poor man’s loan under a government scheme. For earlier story read: http://www.moneylife.in/article/customer-awareness-banks-keeping-banks-on-their-toes/18421.html
For better credit reporting and the credit bureau to work, ‘the boards of MFIs’ must be able to re-orient their organizational vision to one of responsible finance—this means they will have to move away from their desire for ‘super fast’ unnatural growth to balanced natural growth and normal profits
Okay, the preceding article summarized issues concerning the Microfinance credit bureau in India. If that is the situation, what then can perhaps make credit reporting better and also a credit bureau to really work in terms of checking multiple, over and ghost lending? In my opinion, there are several things that need to happen and I hope that the RBI, IFC, Omidyar and the microfinance industry work together in ensuring that these happen on the ground…
First, for better credit reporting and the credit bureau to work, ‘the boards of MFIs’ must be able to re-orient their organizational vision to one of responsible finance—this means they will have to move away from their desire for ‘super fast’ unnatural growth and high profits (to gain better valuations in investment and go for an IPO, etc) to balanced natural growth and normal profits. Much of the motivation for multiple lending, ghost lending, performance misreporting (as happened at Sahayata) appears to be related to the above and unless that vision is altered, no amount of technology can perhaps prevent multiple lending. Technology was touted as the solution in 2005-06 after the Krishna crisis and you can judge for yourself what it has achieved so far…You may want to a previous Moneylife article on MIS (Establishing standards for effective management information systems for MFIs) which clearly shows that even the most basic issues with regard to an MIS still need significant attention in Indian microfinance—and even among the largest Indian MFIs (microfinance institutions).
That said, even when the boards take the call, the MFI’s senior management must be willing and able to translate the above vision into action by bringing about changes in systems, policies, procedures, processes, staff attitudes, etc. This is very critical as otherwise, ‘intended strategies’ will remain on paper and realized strategies will be very different. It is like what Jack Welch, the famous CEO, commenting on the new breed of strategic planners in the 1980s, once said, “There is no point in developing great plans with lot of effort when you are going to do something else on the ground. Often times, organizations put these well-prepared plans in the shelf and lock them up and get around to doing what they are anyway doing”. Again, the case of what happened at Sahayata should not be forgotten where its MD and CEO flattered to deceive by first espousing great concepts at the Microfinance India Summit 2010, only to be charged with serious misreporting within a year later (What is said at conferences is very different from what is implemented in practice)
Therefore, once the MFI board and senior management have done what they have to do, then it may be possible to check multiple lending provided:
a. Internal control systems have sufficient checks/balances to do so;
b. Internal audits spot multiple and ghost lending exceptions, as and when they occur and recommend/ensure immediate corrective action
c. MIS provides accurate branch/field level data both from the perspective of the credit bureau (CB) and also in terms of portraying ground level reality, so that multiple and ghost lending can be tracked and dealt with—this is a very critical aspect
d. Field level frontline are not incentivized on disbursements and they are also made to believe in and work towards responsible finance—where multiple, ghost and reckless lending and use of agents is viewed as a bane rather than boon for the organisation
e. A related issue here is that MFIs must whole-heartedly decide to adopt greenfield client acquisition processes and do not indulge in other types of (not-so-desirable and fast tracked) client acquisition methods
f. Bankers exercise appropriate due diligence with regard to multiple and ghost lending, as part of their (notional) supervisory role in discharging their priority sector obligations, and
g. The central bank ensures appropriate supervision on the ground, with regard to its (NBFC) MFIs, as part of its on-site and off-site supervision obligations stemming from its non-bank supervision duties
This and much more—all with a view to put clients and their situations/needs first—would have to be done to ensure stop page of multiple, ghost and over ending that led to the Indian microfinance crisis of 2010. Therefore, the idea of thinking that a credit bureau alone could eliminate multiple lending seems very naïve—like the experiences with the previous codes of conduct (which were not implemented on the ground), such a view could result in the credit bureau becoming a red herring rather than actual solution, because, it may then distract the microfinance industry and its stakeholders from the real problems (like use of agents and shares JLGs/clients) at the grass-roots…
(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments)
Bharti Telecom has acquired 5,90,240 shares of the private telecom operator totalling Rs20.50 crore
Bharti Telecom, the largest promoter group of Bharti Airtel, has purchased shares of the private telecom operator worth Rs20.50 crore through open market transactions.
Bharti Telecom has acquired 5,90,240 shares of the private telecom operator totalling Rs20.50 crore, Bharti Airtel said in a disclosure to the BSE.
Prior to the share purchase, Bharti Telecom held a 45.60% stake in Bharti Airtel. It now has a 45.62% stake in the telecom service provider. As per shareholding data available on the BSE, Bharti Telecom held 1,729,264,367 shares, representing a 45.54% stake, in the operator as of the quarter ended September 2011.
On Wednesday, Bharti Airtel ended at Rs348.85 per share on the Bombay Stock Exchange, 0.71% up from the previous close.