Citizens' Issues
Finance ministry withdraws its controversial diktat to levy processing fees on payment of credit card dues by cheque or cash

Moneylife Impact: The finance ministry’s strange and controversial diktat to public sector banks to emulate HDFC Bank and levy processing charges on payment of credit card dues by cash or cheque was exposed and followed by Moneylife alone. The rest of the media, including the business press is still silent on this issue

In a letter dated 12th March, the finance ministry has quietly withdrawn its ‘fatwa’ to “consider charging a processing fee from customers paying credit card dues either in cash or through cheque”.  In fact, this letter too is written by the same DD Maheshwari, Under Secretary at the Department of Financial Services, who sent out a fatwa marked “most immediate” to all chief executives of public sector banks on 25 October 2012. This time he writes that the letter “stands withdrawn with immediate effect. This has the approval of the Secretary (FS)”.(see letter here)


The finance ministry’s decision to withdraw the letter is a very positive development from the customer’s point of view. It not only means that banks will not be charging this absurd processing fee, but also reveals that the finance ministry is sensitive to public opinion. Our report (Read: Now, penalty for paying credit card dues by cheque! ) had created a furore among depositors and has been the most read, most shared and most commented article on www.moneylife.in for the past fortnight. So what was the anger about?
 

Well, the finance ministry had not only asked for such a processing fee to be levied, but held HDFC Bank as the example to emulate. It specifically mentioned how HDFC Bank had doubled its charges for cash transactions from Rs50 to Rs100 per transaction. It had also asked banks CEOs to report their action taken to the ministry.
 

What was particularly outrageous about the finance ministry’s micro-management of fees charged by banks was that the Reserve Bank of India (RBI), which is the banking regulator, is in the process of ‘considering’ the comments to a similar report that it had issued on “dis-incentivising cheque transactions” by levying a slew of fees and charges on everybody who issues or deposits a cheque. Please read RBI Must Scrap No Cheque Idea, which is the most commented article in Moneylife since then.
 

Moneylife Foundation, our sister entity which has over 21,500 members, had sent a strong memorandum to the RBI asking it to scrap the report in toto. (Moneylife Foundation demands scrapping of the move to penalise usage of cheques ). We have since learnt from another activist that the RBI has received at least 300 representations against this plan. In fact, leading NGOs in Mumbai are scheduled to meet on 21st March to discuss a joint plan to oppose such a move. Those who are attending the meeting include the Mumbai Grahak Panchayat, All India Bank Depositors Association, Consumer Guidance Society of India, Moneylife Foundation, Council for Fair Business Practices, Consumer Complaints Cell and Save Our Lands. The All India Bank Employees Association is also participating in the discussion.
 

Moneylife columnist Gurpur, a senior banker, had also pointed out how a country like the United Kingdom had bowed to public pressure given up the idea of abolishing cheque usage. See UK govt bows to public pressure—rejects abolition of cheque system. Will RBI follow suit?  And even superpowers like the US, who are way ahead of India in terms of adoption of information technology, continue to use cheques.

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COMMENTS

Amit Bhargava

4 years ago

After the Money Life exposed the "fatwa" from the Finance Ministry, the same under secretary Most Immediately issues another letter, but "Chupke Se".

Good job Money Life !

nagesh kini

4 years ago

Pray can the Hon. FM clarify as to who is the Regulator?
The RBI at Mint Road, Mumbai or a babu sitting at Parliament Street New Delhi? How much does this guy who must have just come to the MOF after some remote posting know of banking to pass such hare brained fatwas quoting just one bank as the role model?
The so-called dis-incentivization for cheques is another crazy move that needs to be scrapped lock, stock and barrel as it does not suit Indian conditions.

CA PRADEEP AGARWAL

4 years ago

Really, money life is doing great to the society, hope the best for future also.

rashida

4 years ago

Great,keep it up!

Sankara Narayan

4 years ago

Congrats , Money life for the excellent work. It once again proves that these babus dont have any touch with social reality. Even many educated have become tecnophobes! , not wanting to use internet even for email communications . The various types of net scams make them more unsure . Such being the reality , Thuglaks are in their own world issuing such'fatwas' !

REPLY

CA PRADEEP AGARWAL

In Reply to Sankara Narayan 4 years ago

Agree, because all work I feel is done with some preconceived notions in mind.

hasmukh

4 years ago

It was a Tughlakhi idea and was bound to be withdrawn. Hope, the Babus spend their time to bring out some really meaningful and sensible ideas.
They must have spent lot of time in drafting same. Also Moneylife etc. had to waste their valuable time & energy in opposing such meaningless dictats.

Hystaspes F Engineer

4 years ago

"HEART CONGRATS" to the while ML team for launching the timely campaign and achieving a rather quick success. Keep-up to your good work. Now, the fight for the 'cheque abolition system' need to be ably pursued. These are short sighted immature moves of the govt. m/c which need to be nipped in the bud spontaneously. "ALL THE BEST".

CA PRADEEP AGARWAL

4 years ago

It is really good, MONEY LIFE TEAM has shown what it can do for the benefit of consumers.

Ramesh Iyer

4 years ago

Congratulations to MoneyLife team for having highlighted this matter incessantly, building huge public opinion against this impractical decision by the govt's earlier note. While I would agree with RBI & MoF on encouraging people to adopt tech-based facilities on which Banks have invested millions, they can't ignore the fact that there are plenty more who don't have access to such facilities in the first place. In fact, even in urban areas, where ALL Banks have setup much of their IT-enabled infrastructure, like ATMs, it is not uncommon to find many of them even right outside the Branch not functioning. Hence, while people would love to embrace facilities which makes it convenient for them, penalizing for Banking the traditional way is too harsh and impractical, considering how few customers are IT-savvy (of the large customer-base).

jaideep shirali

4 years ago

Congrats to the Moneylife team for getting consumers the right they deserve. Certainly the RBI does not know what it is doing, because just recently, they insisted on a new format of cheques. So we would have banks sitting with an inventory of pre-printed chequebooks and customers who do not wish to use them, because of the charges.

REPLY

MOHAN SIROYA

In Reply to jaideep shirali 4 years ago

Mr Shirali

As per our knowledge and directives of RBI , at least all savings bank holders are supposed to get the new CTS cheque books without paying any charge. Have you paid or is your bank is asking? In fact we have cases, where even Current account holders got replaced the non-CTS CQ folios without paying any charge.
Perhaps the Consumer Complaints Cell may help you if U send the details to them on [email protected] or to me
MOhan Siroya

Vinita Deshmukh

4 years ago

Absolutely brilliant Sucheta and Debashis. v v proud of both of you. The best example of pro-active, pro-citizen financial journalism! Kudos.

MOHAN SIROYA

4 years ago

Kudos and Hearty Compliments to you Sucheta and our "MOney life" for taking up this issue vigorously. Perhaps, it was 'Fait accomply" for the Govt./RBI as the repurcussions of this 'Regressive and Repressive' step would have waned away a large chunk of voters to the UPA parties, especially the Congress .
"Money Life" should Keep up to take cudegels against such high public importance causes.

Mohan Siroya

Vaibhav Dhoka

4 years ago

congratulations and good impact for united action.

Nihar Mody

4 years ago

If RBI insists on non usage of cheques, It shold also take full resposibilty for online frauds. Are they ready for it?

Suiketu Shah

4 years ago

Excellent work Ms Dalal,Mr Basu and all at ml:)
Suektu

Nifty, Sensex to remain weak: Monday Closing Report

Unless the Nifty closes above 5,970, the market is headed lower

 
The market settled in the negative as cautiousness prevailed a day ahead of the RBI’s policy review and on weak global cues. Unless the Nifty closes above 5,970, the market is headed lower. The National Stock Exchange (NSE) witnessed a lower volume of 46.79 crore shares and advance-decline ratio of 543:949.
 
The market opened in the negative after Cyprus, which was granted a 10 billion euro bailout package by Eurozone ministers over the weekend, decided to impose an unprecedented levy on bank deposits. The new levy also rattled markets across Asia this morning. Nervousness ahead of the Reserve Bank of India’s policy review, scheduled to be announced tomorrow, also weighed on the investors.
 
The Nifty resumed trade down 56 points at 5,817 and the Sensex started off 145 points lower at 19,283. The market slipped to its intraday lows in initial trade itself with the Nifty falling to 5,814 and the Sensex going back to 19,232.
 
The market witnessed sideways movement in the morning session in the absence of any fresh triggers. European markets, which opened with cuts of over 1% on account of the Cyprus banking levy, also weighed on the domestic market in the post-noon session.
 
However, buying in fast moving consumer goods, consumer durables and healthcare stocks helped the market hit its high in the last hour of trade. The Nifty rose to 5,850 and the Sensex went up to 19,345 at their highs.
 
The market settled off the highs in the negative on pressure from metal, PSU and auto sectors and unsupportive global cues. The Nifty settled 37 points (0.64%) down at 5,835 and the Sensex lost 134 points (0.69%) to close the session at 19,293.
 
Among the broader indices, the BSE Mid-cap index fell 0.29% and the BSE Small-cap index dropped 0.67%. 
 
BSE Fast Moving Consumer Goods (up 0.68%); BSE Consumer Durables (up 0.32%) and BSE Healthcare (up 0.30%) were the sectoral gainers today. The lop losers were BSE Metal (down 2.34%); BSE PSU (down 1.64%); BSE Auto (down 1.44%); BSE Realty (down 1.21%) and BSE Oil & Gas (down 1.20%).
 
Six of the 30 stocks on the Sensex closed in the positive. The main gainers were Cipla (up 1.70%); Hindustan Unilever (up 1.20%); HDFC Bank (up 0.75%); ITC (up 0.66%) and Hero MotoCorp (up 0.18%). The main losers were Coal India (down 5.41%); Tata Power (down 3.43%); GAIL India (down 3.16%); Maruti Suzuki (down 2.98%) and Sterlite Industries (down 2.68%).
 
The top two A Group gainers on the BSE were—Pidilite Industries (up 4.44%) and GMR Infrastructure (up 4.44%).
The top two A Group losers on the BSE were—Coal India (down 5.41%) and Engineers India (down 4.83%). 
 
The top two B Group gainers on the BSE were—Sowbhagya Media (up 20%) and Keltech Energies (up 19.99%).
The top two B Group losers on the BSE were—Rathi Bars (down 18.32%) and Ram Informatics (down 17.36%).
 
Of the 50 stocks on the Nifty, 11 ended in the green. The key gainers were Cipla (up 2.15%); HCL Technologies (up 1.38%); Siemens (up 1.18%); HUL (up 1.12%) and ITC (up 1.01%). The major losers were Coal India (down 5.72%); IDFC (down 3.49%); Tata Power (down 3.44%); Maruti Suzuki and Ambuja Cement (down 3.09% each).
 
Markets in Asia closed lower on the back of issues pertaining to bailout issues in Cyprus. This apart, new curbs on real estate purchases in China also dented sentiments.
 
The Shanghai Composite tanked 1.68%; the Hang Seng dropped 2%; the Jakarta Composite fell 0.34%; the KLSE Composite declined 0.39%; the Nikkei 225 tumbled 2.71%; the Straits Times declined 0.90%; the Seoul Composite contracted 0.92% and the Taiwan Weighted settled 1.47% lower.
 
At the time of writing, the key European markets were down between 0.78% and 1.37% while the US stock futures were sharply lower, indicating a subdued opening for US stocks later in the day.
 
Back home, foreign institutional investors were net buyers of shares amounting to Rs1,018.94 crore on Friday while domestic investors were net sellers of equities totalling Rs584.48 crore. 
 
Infrastructure developer, IL&FS Engineering and Construction Company, has received a letter of award from Cairn India for a buildings and structures project valued at Rs52.47 crore. The project, which involves construction of staff quarters, guest house, administration, cafeteria, mess, boys’ hostel, girls’ hostel, academic, etc, is to be completed in 15 months. The stock declined 0.82% to close at Rs54.15 on the NSE.
 
Mangalore Refinery and Petrochemicals will construct the Government Lady Goschen Hospital in Mangalore as part of its corporate social responsibility. To be built at a cost of Rs21.70 crore, the hospital will come up on 12,000 sq ft of area in the next three years. MRPL climbed 2.39% to close at Rs53.50 on the NSE.
 

 

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Yet another bank fined in the US for a Magnetar deal, with yet more revealing emails

Deutsche Bank agrees to pay $17.5 million to Massachusetts for a deal involving Magnetar, the hedge fund behind many CDOs gone sour

Deutsche Bank is the latest financial institution to be fined for not warning investors about the role of the hedge fund Magnetar in creating complex mortgage-backed deals that later failed.

 

As we detailed in 2010 with This American Life and NPR’s Planet Money, Magnetar helped create $40 billion worth of deals. The hedge fund, meanwhile, had taken positions that allowed it to profit when many of those same deals collapsed. Since ProPublica reported on Magnetar's dealings three years ago, there's been a long line of investigations and settlements related to the firm.


A Massachusetts financial regulator fined Deutsche Bank $17.5 million Wednesday, saying that the bank did not disclose the role of a securities unit or Magnetar in structuring one such deal – a collateralized debt obligation known as Carina CDO Ltd.

 

In marketing the deal to investors, Deutsche Bank also did not reveal that Magnetar planned to bet against some of the assets in Carina.
 

“There is not a single reference in Carina’s sales and marketing materials relating to conflicts of interest,” wrote Massachusetts Secretary of the Commonwealth William Galvin in an order released yesterday.

 

Carina was worth $1.56 billion, and went bust in 2007, just a year after it was created. Carina was one of the deals described in ProPublica’s articles.

 

In reaching the settlement, Deutsche Bank did not admit or deny the charges against it. That’s also been the case in other settlements related to Magnetar deals. Such settlements now total more than $300 million. A spokeswoman for Deutsche Bank said, “We are pleased to have reached this settlement and put this matter behind us.”

 

Magnetar has never been charged with any wrongdoing related to the creation of the deals and has always maintained it did not select the assets that went into its CDOs and that it was "market neutral," meaning it would make money whether housing rose or fell. Magnetar has not responded to our latest request for comment.

 

Emails quoted in the order suggest Magnetar and Deutsche Bank’s securities unit working in tandem to structure Carina:

"create a deal that Magnetar likes" (p. 16)

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