Banks can’t freeze accounts if KYC documents not supplied: HC

The Gujarat High Court has ruled that banks cannot freeze accounts nor can they stop issuing cheque book or providing ATM facility where the accountholder has not supplied KYC documents. The court has further ruled that presence of the accountholder was not a ‘must’ for production of documents required for KYC

Ahmedabad: The Gujarat High Court has ruled that banks cannot freeze accounts nor can they stop issuing cheque book or providing ATM facility where the accountholder has not supplied KYC (Know Your Customer) documents, reports PTI.

The court has further ruled that presence of the accountholder was not a ‘must’ for production of documents required for KYC.

The ruling was given by division bench of justices Jayant Patel and Paresh Upadhyay last week while hearing a petition seeking temporary bail filed by one of the convicts of the 2008 Patan gangrape case, serving a life term.

The accused Ashwin Parmar had approached the high court for temporary bail on the ground that he was required to remain himself present at the State Bank of India (SBI) branch to submit documents under KYC norms.

If he did not submit KYC documents, the bank would freeze his account or stop other banking facilities, he claimed. The court, however, did not appreciate the rule governing KYC norms.

“For production of the documents required for KYC, personal presence of the accountholder is not a must. If such documents are submitted by duly authorised representative of the accountholder, the bank is required to accept the same,” the court ruled.

“If documents of KYC are not supplied by the accountholder, such account cannot be frozen nor the facility of the cheque book or ATM can be stopped by the bank,” it further stated.

The court, however, said that if the requisite documents of KYC are not supplied as per the Reserve Bank of India (RBI) guidelines or the circular issued by SBI, the account can be closed, after due notice to the accountholder.

It also observed that in banking system, “insistence by a bank and more particularly a nationalised bank for personal presence of the accountholder for production of such document is uncalled for”.

It said that a convict or under-trial prisoner who is in jail shall be at liberty to submit the KYC documents in form of a certified true copy by competent authority.

The court also directed the chief general manager of SBI here to issue instructions in this regard to all branches.

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COMMENTS

Mayank Jain

5 years ago

Can anyone give me the citation of this particular order.
Even the case reference number will do.

Banks can save Rs300 crore annually by switching over to RuPay: NPCI

“Adoption of the RuPay Card will help banks save Rs250-Rs300 crore annually as our interchange charge is cheaper by up to 40% than what banks pay to foreign cards like Visa and MasterCard,” NPCI managing director and chief executive officer AP Hota said

Mumbai: A switchover to RuPay Card, the Indian version of Visa or MasterCard, can help domestic banks save as much Rs300 crore annually in transaction fees, reports PTI quoting the National Payments Corporation of India (NPCI), which launched the card last week.

“Adoption of the RuPay Card will help banks save Rs250-Rs300 crore annually as our interchange charge is cheaper by up to 40% than what banks pay to foreign cards like Visa and MasterCard,” NPCI managing director and chief executive officer AP Hota told PTI.

After years of preparation and soft launch, NPCI commercially launched RuPay Card on 26th March with major banks such as SBI, BoB, UBI, BoI, Corporation Bank and Axis Bank launching their domestic debit cards on the RuPay platform.

This makes the country second after China to have an indigenous electronic payment card.

Typically, banks pay around 1.8% of the transaction value in interchange charges. This is shared between the payment gateway operators like Visa and MasterCard, the card issuing bank, and the merchant.

While the card-issuing bank charges around 0.25%-0.30% of this, an equal amount is taken in by the merchant too, with the rest being retained by the card company such as Visa.

But Mr Hota said NCPI will retain only up to 60% of this around 1.2% going by the current fee structure.

According to the banks, foreign cards charge around $30,000-$50,000 as one-time fee and around $10,000-$30,000 quarterly.

In FY09-10, according to the Reserve Bank of India (RBI), domestic banks coughed out Rs490 crore in interchange charges to Visa and MasterCard.

For RuPay, there will be no one-time joining fee, and other charges would be around 40% less.

All the major banks are likely to be on the RuPay network in six months, Mr Hota said, adding that there was no compulsion to switch to the RuPay. “Our low cost should be reason enough for them to adopt our card. By March 2015, I expect at least half the market under the RuPay.”

His optimism comes from the low penetration among the regional rural banks, co-operative banks and small commercial banks due to high cost of joining foreign card payment system.

Another advantage, he said, is that as the transaction happens domestically, it will lead to lower cost of clearing and settlement, apart from the facility of paying in rupee.

Being a not-for profit company also helps us lower the cost, Mr Hota said.

He also said the RuPay would make debit cards safer by incorporating the pin number with each transaction. At present, only MasterCard requires the user to furnish the pin number every time the card is used.

RuPay will be accepted at all the 91,000 ATMs and over 6 lakh points of sale terminals in the country and in due course, it will be accepted on the Internet and also at ATMs/PoS terminals abroad. NPCI has finalised an arrangement with payment gateway Discover for international acceptance.

According to RBI data, there are nearly 27 crore debit cards in the country today.

SBI managing director and chief financial officer Diwakar Gupta said that though there is no compulsion, it makes business sense for banks to adopt RuPay.

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FII inflows into Indian stocks touch $9 billion

During March, FIIs were gross buyers of shares worth Rs63,795.10 crore, while they sold equities amounting to Rs55,413.80 crore, translating into a net investment of Rs8,381.10 crore, as per data available with SEBI

Mumbai: Overseas investors have pumped in about Rs8,381.10 crore ($1.68 billion) in the Indian equity market in the month of March, taking the calendar year to date total to a whopping Rs43,950.70 crore ($8.89 billion), reports PTI.

During March, Foreign Institutional Investors (FIIs) were gross buyers of shares worth Rs63,795.10 crore, while they sold equities amounting to Rs55,413.80 crore, translating into a net investment of Rs8,381.10 crore, as per data available with the Securities and Exchange Board of India (SEBI).

With FIIs having already poured nearly $9 billion so far this year, inflows from the investors are likely to touch $10 billion in the next few weeks, analysts believe.

“Their investment in the first quarter of this year is one of the highest investments in any quarter in the last 10-12 years. FII inflows are likely to cross $10 billion mark in the next few weeks,” Religare Securities executive vice president & head (retail research) Rajesh Jain said.

Mr Jain said the quantum of FII inflows goes to show that they still have confidence in the Indian economy.

Regarding the P-notes, he said the finance minister has given a positive statement and that was the reason behind the rally in the market on Friday (30th March).

Participatory Notes (P-Notes) are instruments that allow foreign institutional investors (FIIs), which are not registered with market regulator SEBI, to invest in the Indian equity market.

Meanwhile, the foreign fund houses have sold Rs6,588.60 crore ($1.29 billion) in the debt market last month. This takes their overall net investments into debt markets to Rs4,157.30 crore ($812.80 million) this year.

FIIs had mostly stayed away from Indian equities in 2011 pulling out Rs2,812 crore and instead, flocked towards the debt market with a net investment of Rs20,293 crore.

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