In 2008, the apex bank had clearly specified the rules and regulations on the addition or deletion of a joint account-holder’s name under specific circumstances. However, this rule is not being followed
Reserve Bank of India regulations clearly specify that a bank has to maintain an account in the name of a joint account-holder, on the demise of a primary or joint account-holder. But a few instances have come to light where banks are openly flouting these rules-and putting a number of bereaved families under pressure.
Take the case of Pune-based resident Anil Agashe, who held a joint savings account along with his father in HDFC Bank's Satara (in Maharashtra) branch. After his father's demise, he approached the bank to delete his father's name and continue with the account in his name. However, the bank informed Mr Agashe that "as per the rules of the bank" the account would be closed on the death of the first account holder and a new account will have to be opened in Mr Agashe's name.
But while this move might seem logical, it actually creates a number of problems for the surviving account-holder. For example, the existing account number might be having an ECS facility for direct credit of mutual fund dividend amounts or a direct debit facility for paying of utility bills.
The surviving joint account-holder will then have to spend time and money informing all the entities linked to the previous account number, the 'new' account number.
In this case, being an ex-bank employee himself, Mr Agashe demanded in writing about the bank's rules, since the joint account was operating with "either or survivor" status. In fact, the RBI allows simple deletion of a deceased person's name from a particular account.
After many meetings with the bank manger, Mr Agashe was told that there was a "way out" to continue with the account. Later, his account was changed from a senior citizen zero-balance account to a regular savings account.
In the e-mail Mr Agashe had sent to the bank's managing director Aditya Puri, for the trouble he had gone through, HDFC Bank replied to the message, admitting its mistake and blamed the core banking system for the problem.
"As you have correctly stated, regulatory guidelines, vide Master Circular dated 3rd November 2008, allow for such deletion/addition of joint holders in an account if the circumstances warrant. In deference to these guidelines, the Bank has raised a request for suitable changes in its Core Banking system to accommodate this functionality. However, as the Core Banking platform of the Bank itself is undergoing a change to a new system, all systemic developments have been kept in abeyance till the system changeover. Hence, in the interim, we are continuing with our extant practices in this matter," the bank said in the e-mailed reply.
Such a reply comes as a surprise, since these RBI guidelines were issued way back in 2008-and why have they not been implemented? Is blaming the core banking system any excuse?
Mr Agashe told Moneylife, "When I used to work with a bank way back in 1977, we used to simply delete the deceased person's name after verifying the death certificate. There were no such guidelines then, RBI in 2008 just reissued these guidelines. The bank manger himself had no idea about the master circulars.
"My objection is that a bank can't have a procedure which is at variance with RBI guidelines. This will carry an operational risk on part of the bank," he explained.
Sources have confirmed to Moneylife that the RBI would be taking up this issue with the bank. It is also known that these issues regarding consumer banking will be addressed in the report on customer services, which the panel headed by M Damodaran has to table.
Having been a banker himself, Mr Agashe got his issue resolved. But what about other customers who don't know their rights? "Many people are unaware of the rules and regulations of the RBI, which gives an easy route for banks to get away with their poor services," says Mr Agashe.
Watch for Nifty to close above 5,450 for a possible short rally
The market opened positive, tracking gains across Asia. The Sensex started at 18,167, while the Nifty opened at 5,448, the identical opening level yesterday. A rise in commodity prices in the international market supported gains in metals and oil & gas stocks in early trade. Banking stocks were also in demand, after being down for two days following the dismal numbers by the State Bank of India. Market performance was range-bound and the indices stayed within Wednesday's high and low. The Sensex closed 55 points up at 18,141 and the Nifty closed eight points up at 5,428.
The market remained range-bound, even as weekly food inflation numbers for early May came in lower at 7.47%. Turnkey engineering major Larsen & Toubro's (L&T) better-than-expected numbers helped the company's stock take the top gainer's position on the Sensex, though the market seemed to overlook the development.
The intra-day movement on the Sensex was between 18,058 and 18,198 while the Nifty traded between 5,411 and 5,453. The Nifty will be strengthen for a few days only above 5,450.
The advance-decline ratio on the National Stock Exchange was 548:1142.
The broader markets underperformed the Sensex today, as the BSE Mid-cap index declined 0.70% and the BSE Small-cap index was down 0.54%.
In the sectoral space, BSE Capital Goods (up 2.82%), BSE Oil & Gas (up 1.16%) and BSE IT (up 0.34%) were the top gainers. BSE Realty (down 2.87%), BSE Metal (down 0.98%) and BSE Power (down 0.85%) were the main losers.
L&T (up 5.92%), Reliance Industries (up 1.45%), ONGC (up 1.20%), TCS (up 1.14%) and Mahindra & Mahindra (up 1.11%) were the top performers on the Sensex. The laggards were led by Reliance Communications (down 3.43%), DLF (down 3.35%), Hindalco Industries (down 3.14%), Tata Power (down 2.60%) and Hero Honda (down 2.31%).
Continuing on its downward trend, the country's food inflation slipped further to 7.47% for the week ended 7th May, from 7.70% in the previous week. This is the lowest rate of price rise in food items in the last 18 months, since separate data for food inflation started coming in. It is also the third consecutive week that food inflation has been lower.
Commenting on the decline, finance minister Pranab Mukherjee said, "Both in food inflation and overall Whole Price Index (WPI) inflation there is a declining trend."
Markets in Asia, which opened strong this morning, settled mixed on the decline in Japanese gross domestic product (GDP) in the March quarter. GDP fell to an annualised 3.7% in the three-month period, exceeding analysts' estimates, pushing the country into its third recession. South Korean electronics major Samsung Electronics declined 1.5% after Gartner reported the company's share of the mobile handset market slipped to 16.1% from 18% earlier.
Singapore's benchmark Straits Times closed up 1% on news that its economy grew 22.5% in the first quarter of 2011 on an annualized, seasonally adjusted quarter-on-quarter basis.
The Hang Seng gained 0.66%, the Jakarta Composite rose 0.51%, the KLSE Composite added 0.18% and the Straits Times surged 1%. On the other hand, the Shanghai Composite fell by 0.45%, the Nikkei 225 declined 0.43%, the Seoul Composite tumbled 1.89% and the Taiwan Weighted lost 0.58%.
Back home, foreign institutional investors were net sellers of equities on Wednesday, offloading stocks worth Rs379.44 crore. On the other hand, domestic institutional investors were net buyers of shares worth Rs27.46 crore.
Although prima facie, the Speak Asia case appears to be fit for trial under the Prize Chits and Money Circulation Schemes (Banning) Act, the question is since it is not registered in the country, how and where would the proceedings be initiated against the MLM company
Speak Asia (SpeakAsiaonline.com) has been collecting large sums of money by rapidly enrolling people with the promise of incredible payments for simply filling out online surveys. We learn from our investigation and this has been confirmed by Speak Asia officials, that the company is not registered in India and so cannot present any legal documentation. Now, a debate has been set off on whether Speak Asia and its multi-level marketing (MLM) scheme can be banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCSB Act).
Only two days ago, the Manipur state government used provisions of the PCMCSB Act to ban MLM companies. The state government said in a notification, "The MLM, though called by very attractive names, squarely falls within the definition of 'Money Circulation Scheme' under the Act and hence is prohibited by the Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978."
"This is to inform all the general public, government officials and others concerned that the specific provisions under Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978, relevant sections under cheating Section 420 of IPC, Drugs and Cosmetics Act 1940 by the Ministry of Health and Family Welfare, Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 are abundantly available to be invoked and effectively check and prevent progress of such dubious floated companies," the notification said.
"Section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 bans prize chit and money circulation schemes, or enrolment as members to any such schemes, or participation in such schemes. Sections 4 and 5 are penal provisions and prescribe punishment. Section 6 deals with offences committed by companies. Section 7 authorises a police officer, not below the rank of officer in charge of a police station, to exercise power to enter and search premises and to seize things used for such scheme. Section 8 provides for forfeiture of newspaper and publication containing money circulation scheme. The Preamble of 1978 Act declares that it has been enacted to ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith and incidental thereto," the notification said.
Not long ago, the Andhra Pradesh government also used the same Act to ban Japan Life, Amway and GoldQuest. Shyam Sundar Matham of Corporate Frauds Watch (CFW) says, "The Andhra Pradesh High Court stated in its judgement that the business model of Amway India attracts the provisions of the PCMCS Act, 1978 and it asked the police to continue the investigation and file the charge-sheet in six months. Now the case is pending in the Chief Metropolitan Magistrate's Court, Nampally, Hyderabad under the same enactment."
The PCMCSB Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme (Section 3 of the Act). Under the provisions of the Act, the state governments were initially required to frame rules in consultation with the Reserve Bank of India (RBI) for winding up of the companies, which were running in contravention of the Act.
Earlier, the RBI, after receiving a complaint or information, would examine whether there was any prima facie case under the provision of the PCMCSB Act. The central bank would then inform the police, advising investigation and appropriate action. This was done by using the opinion given by the RBI and SR Hegde, the then legal advisor of the central bank, in September 2001.
However, in February 2003, the RBI issued another circular saying that it had no role to play and that its legal opinion (provided in September 2001) should be considered null and void. In the second circular, the RBI said that the PCMCSB Act was to be used by state governments, through consultation with their legal advisors and not depending on the central bank.
This is fine with MLM companies who operate or have offices in a particular state. But, since Speak Asia does not have its own office and is not registered in India, the question is which state government would take action against it? This is why authorities in Uttar Pradesh have taken action against some franchisees, but not against Speak Asia. It is being suggested that the union government, through the Enforcement Directorate (ED) and the Income Tax department (I-T) could initiate proceedings against Speak Asia. (The company says that it has remitted Rs325 crore to Singapore and distributed about Rs250 crore to its agents in India, for filling surveys, without deducting any tax.)
According to media reports, the Ministry of Corporate Affairs (MCA) has started an investigation on Speak Asia and is working together with the RBI and the Securities and Exchange Board of India (SEBI). Last month, Moneylife Foundation sent a letter to Murli Deora, minister of corporate affairs, RPN Singh, minister of state for corporate affairs, the Secretary MCA and other officials, informing them about Speak Asia. (Click to read the letter)
Nowadays, many media organisations are even using our reports on Speak Asia in their stories and correspondence, without acknowledging Moneylife. Its a different story that they all want to take credit for exposing Speak Asia now, purposely forgetting that the content they are using has its origin on the Moneylife website.
The Bharatiya Janata Party's national secretary, Kirit Somaiyaa, who has filed a case against Speak Asia with the Economics Offences Wing (EOW), in Mumbai, too has used Moneylife reports almost verbatim in his correspondence with the finance ministry, SEBI, RBI and EOW.
Frankly, as long as it serves the purpose we do not mind anyone taking any credit for anything. Our humble request is at least acknowledge Moneylife, which would boost our efforts in the fight against frauds.
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