Following the arrest of Vijay Singla, the nephew of railway minister Pawan Kumar Bansal while accepting a bribe, activists have demanded an enquiry of the promotion and transfer process of the Indian Railways
Following the arrest of Vijay Singla, the nephew of Railway minister Pawan Kumar Bansal, activists have demanded an enquiry into the promotion of Mahesh Kumar as member of Railway Board as well as the role played by the minister.
Mumbai-based activist Samir Zaveri has been sending letters to the prime minister and railway minister as well as Railway Board to dismiss Mahesh Kumar for failing to detect several frauds when he was heading the vigilance team at Western Railway in Mumbai.
Similarly, Lucknow-based social activist Dr Nutan Thakur has demanded that in the light of Pawan Bansal’s nephew episode, the Central Bureau of Investigation (CBI) should also enquire into railway officer Mahesh Kumar’s recent promotion to the post of Member, Staff.
In her letter written to director of CBI, prime minister and secretary, ministry of personnel, she has said that now there is an immediate and imminent need to look into Mahesh Kumar’s promotion process from general manager of Western Railways to Member of the Railway Board.
Suggesting to treat the entire episode in two distinct stages—promotion from GM to Member from Staff and attempted change to Member from Electrical, Dr Thakur has demanded to act against all those, including the railway minister, involved in the previous decision-making of promoting Kumar from GM to Member, Railway Board, in case circumvention of rules and foul play is found there.
On Friday, the CBI arrested Vijay Singla, nephew of railway minister Pawan Kumar Bansal, for allegedly accepting a portion of the Rs90 lakh bribe to ensure the appointment of a Railway Board member.
The agency also registered a case against three other people—including the accused member (staff) Mahesh Kumar who had taken up his position on the board only a day earlier—after conducting raids in several cities.
Singla, son of Bansal’s sister and one of the leading businessmen in the region, was picked up by a CBI team from New Delhi on Friday evening.
Singla is accused of accepting the money in return for ensuring that Kumar, a 1975 graduate from University of Roorkee who had been the general manager of Western Railway, would be appointed to the Railway Board, which the ministry announced on 2nd May.
According to Zaveri, Mahesh Kumar as chief of vigilance at Mumbai failed to detect and take any action on several frauds in his jurisdiction. “It is open secret that there is a price for getting selective transfers and promotiona anywhere in the Indian Railways from top to bottom. I had sent several requests through emails with supporting evidence to the President of India, the prime minister and others to investigate into the transfer and posting scams in Rail Protection Force at Central Railway as well. However, there is still no action,” he said.
Zaveri said, during Mahesh Kumar's tenure as head of vigilance at Western Railway, the CBI raided a divisional railway manager (DRM) from Ahmedabad and found Rs80 lakh in cash, one kg of gold and 30 wine bottles (prohibited in Gujarat) subsequently arresting him. Citing media reports, Zaveri claimed the CBI was more active in detecting frauds and arresting railway officials than the WR vigilance department headed by Mahesh Kumar.
Incidentally, Subhodh Jain, general manager of Central Railway, was also promoted recently as member of the Railway Board, Zaveri pointed out.
A fall below the low of 5,868 on the Nifty may mean that a new phase of decline has started
The market ended the holiday shortened week on a positive note as investor sentiment was boosted by better-than-expected corporate results and hopes that the Reserve Bank of India (RBI) will cut key rates in its annual monetary on Friday. Signs of a revival in the global economy, after the US reported good macro-economic indicators, also aided the gains. Investors will now shift their focus on fund inflows by foreigners and news about the progress of the monsoon rains, a key indicator of growth.
The Sensex closed 289 points (1.50%) higher and the Nifty finished the week at 5,944, up 73 points (1.24%), making it the third weekly close in the green. A fall below the low of 5,868 on the Nifty may mean that a new phase of decline has started.
The market closed in the positive on Monday on support from consumer durables and fast moving consumer goods after FMCG leader Hindustan Unilever’s results beat market expectations. The benchmarks closed higher on Tuesday as gains in the FMCG sector continued for the second day. The bourses were closed on Wednesday for May Day.
Hopes of a rate cut by the RBI in its annual policy announcement saw all-round buying, resulting in the market closing near its three-month high on Thursday. The market snapped its three-day winning streak on Friday after the RBI sounded caution saying that there is “little room” for further policy easing.
BSE FMCG (up 8%) and BSE IT (up 5%) were the top sectoral performers in the week while BSE Bankex (down 1%) was the lone loser.
Hindustan Unilever (up 23%); Wipro, Sterlite Industries, Mahindra & Mahindra (up 8% each) and Infosys (up 4%) were the top performers on the Sensex. The chief losers were Bajaj Auto, GAIL India, Tata Motors (down 4% each), State Bank of India (down 3%) and Cipla (down 2%).
The key gainers on the Nifty were HUL (up 23%), HCL Technologies (up 10%), M&M (up 8%), Reliance Infrastructure (up 7%) and Sesa Goa (up 6%). Bajaj Auto, GAIL India (down 5% each), Punjab National Bank, Tata Motors (down 4% each) and SBI (down 3%) were the main laggards on the benchmarks.
The RBI, in its annual monetary policy released on 3rd May, announced a 25 basis point cut in the repo rate to 7.25% but kept the cash reserve ratio (CRR) unchanged at 4%. In the macro economic report released Thursday, the RBI said it had “little space” for cutting interest rates as it tries to maintain a balance between growth and inflation.
The HSBC Manufacturing Purchasing Managers' Index (PMI), a key indicator of manufacturing growth, fell for the second straight month in April, declining to 51 from 52 in the previous month. The reading for April was the lowest since November 2011.
The core sector production of eight key industries rebounded with a 2.9% growth in March 2013 from a negative (-) 2.5% growth registered in February 2013. The growth was mainly on account of buoyancy in the production of cement and steel and a marginal increase in electricity generation.
In the corporate scene, Hindustan Unilever, one of India’s leading fast moving consumer goods (FMCG) company, reported 12% year-on-year (y-o-y) increase in net sales to Rs6465.81 crore for the quarter ended 31 March 2013. Likewise, its net profit is up 14.65% y-o-y, and touched Rs787.20 crore for the March 2013 quarter. This was driven by strong performances in domestic consumer business as well as home and personal care divisions.
This apart, HUL’s parent company, Unilever Plc, has announced a buyback of roughly 487 million shares, or 22.52% of the share capital, through an open offer. The buyback will take Unilever Plc’s total shareholding to nearly 60% and thereby gaining firm control over HUL and its decision making activities.
In international news, US stocks closed out the week with good gains as Wall Street cheered a better-than-expected April non-farm payrolls report. US employers added 165,000 jobs in April, while the unemployment rate fell to a four-year low of 7.5%. But the unemployment rate remained well above the 6.5% level at which the Federal Reserve has said it will start raising interest rates.
On the flip side, the rate of growth in the US services sector slowed in April, hitting its weakest pace in nine months. And factory orders saw their biggest decline in seven months.
Banks are not strictly following RBI's KYC norms. Several co-operative banks freely permit significant cash deposits and withdrawals without reporting to the FIU. Moreover, when there still is no infrastructure in place to authenticate biometrics of an Aadhaar holder, how does the RBI think this can be used to verify card transactions?
Reserve Bank of India (RBI), the country’s banking regulator, seems to be keen on pressing the ‘unregulated’ and illegitimate (as it is yet to be sanctioned by Parliament), the Aadhaar or unique identification (UID) to authenticate card present transactions and other related issues. This is when bankers are still not strictly complying with the RBI’s know your customer (KYC) norms. Some lenders, especially co-operative banks are even using ‘gold route’ to facilitate money laundering for builders and developers.
As Moneylife pointed out, a whistleblower from Gujarat confirmed the issue of demand drafts based on cash deposits in a laundering move initiated by a large private bank. The same bank apparently gave loans to builders against the security of gold deposits, knowing fully well that the gold bars were purchased with cash payments by benami fronts of the builder or DDs from small co-operative banks.
This is a double benefit for the private banks, which sell gold at higher than market price and then accept it back as collateral. Our source seems confident that the income tax department does not know about the gold offered as collateral by builders and is an easy way to launder money.
Co-operative banks are notorious for opening accounts without careful verification of PAN or photographs. This is because it is fully understood that such accounts will be closed within a couple of months, once the money is transferred to larger banks. While it is a fairly common practice to evade regulatory scrutiny by accepting deposits of just under Rs50,000, many really tiny banks are brazenly unconcerned about hiding their trail. Co-operative banks also permit the purchase of insurance and other derivative products offered by large banks for which the payments are transferred through co-operative bank accounts opened with cash deposits.
Some co-operative banks are even freely permitting significant cash deposits and withdrawals, which are probably not being reported to the financial intelligence unit (FIU) in the finance ministry, as required under money laundering rules. Or if they are reported in a perfunctory manner, there is no evidence that the FIU either notices or acts on the information.
As Moneylife pointed out, a whistleblower has shown us documentary proof of a dummy account (the account-holder was a drunkard who apparently lent his name for a small price and even signed blank cheques to permit withdrawal of cash) opened with a cash deposit of Rs5,000. Within days, the bank permitted large cheques of Rs15 lakh+, totalling up to Rs80 lakh, being deposited and withdrawn in cash within hours. All this happened in just four days. This instantly converts the cash deposit into a legitimate sum and can be invested in another bank.
If the bank was able to successfully explain this hectic activity in a new account, it clearly means that the rules and processes put in place to detect money laundering simply do not work and there is no way of knowing if banks monitor new accounts for six months.
While the regulator acknowledges the issue, there is no action. Last week, Dr KC Chakrabarty, deputy governor of the RBI said, “Our enquiries have revealed that there were transactional and market conduct issues which need immediate redressal. At the transactional level, instances of bank staff facilitating splitting of deposit transactions by customers for avoiding their reporting as CTRs/STRs to the investigative agencies were also noticed. If these are not unfair and unethical practices then what is? These transactions may be beneficial to individuals but, eventually, they manifest in the form of societal cost.”
Coming back to the issue of using Aadhaar or UID for authentication card present transactions, it looks good only on paper. As per the latest census, 58.7% households were availing banking services in 2011 as compared with 35.5% in 2001. Notwithstanding these efforts by the RBI and the financial sector, the challenges are enormous. Providing banking coverage to a population of 120 crore and ensuring transactions in these accounts is a daunting task.
According to National Payments Corporation of India (NPCI), at the end of October, there were over 1.04 lakh ATMs in the country. State Bank of India (SBI) and its five units had installed 61,500 ATMs, while private sector and foreign banks put together have about 41,800 ATMs. Co-operative banks and regional rural banks have 1,150 machines. All the banks put together have plans to install additionally about one lakh ATMs over a period of next two years, the NPCI said, noting that this will take up the average to 170 ATMs per million of population from the current 85.
While, the government and the RBI have asked banks to accept the Aadhaar number as one of the identification proofs for opening an account, the lenders are not sure about the authentication and verification of these numbers for the payment system. The RBI itself was not confident about Aadhaar as it felt that the UID project is not ready for handling secure payment transactions.
Just last year, Dr Chakrabarty criticised the Aadhaar enrolment process, one of the issues plaguing the UID project. In a report, he stated, “Aadhaar was to give ID to people without cards, but it is giving to those who don’t need one. Even if it signs up 500 million people in the next five to six years, and they are all people like you and me, it will not serve any purpose.”
In addition, several experts have pointed out that using Aadhaar for identification is completely different than using it for authentication. Especially, when it comes to using biometric data of Aadhaar for payment transactions, the facts are not too encouraging. Several poor people like housemaids and construction labourers, are finding it difficult even to enrol for Aadhaar due to lack of a clean fingerprint sample. Some could not even submit sample of their iris due to cataract. So in such cases, how will the Aadhaar help in authenticating the card present transaction?
Bengaluru-based Col (Retd) Mathew Thomas of Citizens’ Action Forum says it is ridiculous to hope that cash for subsidies could be transferred using the UID biometric database. “Why is a biometric database required for cash transfer of subsidies? Hasn’t the US been crediting unemployment dole into SSN accounts, which have no biometrics, for over 70 years? UID is for all residents. Subsidies are for citizens. How would a government agency disbursing subsidies or a bank know whether a person with a UID number is a citizen or not? ” he said.
Following one of the recommendations of the Working Group on securing card present transactions, the RBI has set up another Working Group under the chairmanship of Pulak Kumar Sinha to study the feasibility of Aadhaar as an additional factor for authentication of card present transactions and other related issues. The Working Group is expected to submit its report by end-June 2013.