An improved code forces banks to be more careful about technology-related frauds on their customers, for which banks are unaccountable now
The year promises to begin on a better note for bank customers. A report in the Economic Times (ET) says that the revised code of services by the Banking Codes and Standards Board of India (BCSBI) is going to be significantly pro-consumer and move towards a better balance of rights and obligations between banks and their customers. According to the ET report, there are two main changes. First, when it comes to electronic fraud, the onus of proving that the customer participated in the fraud or compromised the user ID and password will shift to the bank. While the details of the changes prescribed by BCSBI are not known, these changes were recommended by the Damodaran committee on customer services way back in 2011.
Its report had said that Internet banking should be so designed that it would make consumers feel that electronic transactions are safe. And that there should be “a secure total protection policy/zero-liability against loss for any customer induced transaction, utilising technology through ATMs (automated teller machines)/PoS (point of sales)/online banking, etc. A customer should not be made to be out of funds when any loss is suffered on account of Net (Internet)/ATM banking transactions.”
In fact, the committee recommended that banks should allow customers to put in various checks to prevent fraudulent transfers. These could include, restricting transfers abroad unless specified and restricting transfers above a certain value. More recently, at a meeting of nodal officers and banking ombudsmen, Dr KC Chakrabarty deputy governor of the Reserve Bank of India (RBI) had emphatically said that banks cannot push the burden of proof on the customer and, if they could not find suitable insurance cover to mitigate their risk, they may want to reconsider offering Internet banking at all. “Nobody forced you to offer Net Banking,” he said.
The committee recommended tiered security for the safety of mobile transactions which have already been introduced by almost 50 banks. These include—cap on transaction value, destination of transaction (two-level authorisation for non-routine destinations), security based on handsets and the frequency of payments. More importantly, it had said that grievances about mobile banking should be dealt by banks without hassling the customer by referring the matter to the service-provider.
A frequent complaint is about ATMs failing to dispense cash. RBI already requires complaints to be resolved within seven days and the money credited back to the account, failing which the customer is entitled to a compensation of Rs100 per day of delay. RBI’s customer services department is now following up on the Damodaran committee’s recommendation that a small camera should be trained on cash being dispensed into a bin. But banks have been resisting the move on the grounds of the high.
A revised BCSBI code is certainly a big move forward, but customers must remember that the code will not protect customers who fall for phishing or vishing attacks on the pretext of account verification or succumb to the lure of a fake lottery or prize.
Another change in the BCSBI code is that banks will have to drop the quid-pro-quo deals with third-party products on customers, usually borrowers. These would include insurance tie-ups with car dealers, especially when there is a loan involved or making a specific insurance mandatory on mortgage loans.
This is again a small step forward in the large fight that Moneylife has been waging about stopping banks from selling third-party products altogether. We believe it is a strange travesty that banks take advantage of their fiduciary role of keeping deposits safe and, instead, push customers to withdraw funds to buy toxic and expensive insurance and investments, to earn commissions for themselves. But this is a global battle which will require persistent effort by bank customers around the world.
It is debateable as to how much of the rupee depreciation gains on margins are likely to be retained by companies going forward, says Nomura
Nomura analysts are positive on the demand outlook for FY15F in the IT services sector in India. While top IT companies are big exporters, translation of US macro improvements into better US demand, especially in discretionary spend areas, would be keenly watched. This will reinforce Nomura’s expectations of FY15F being a better year than FY14F in terms of demand. This is the key observation by Nomura analysts in their research note on the IT services sector. The analysts believe Europe and IMS/BPO momentum should stay strong and better US growth should provide the kicker for the sector in FY15F.
According to Nomura, Tier-1 IT companies saw 250-300bps quarter-on-quarter benefit on margins in 2Q on account of rupee depreciation. Nomura analysts’ are skeptic on sustainable margins going forward due to possible reinvestment towards growth and passage of benefits to clients/employees. Nomura believes that this is an area where street upgrades can happen, as the margin gains in the last leg of rupee depreciation are likely to be stickier.
Based on well-performing IT companies, Nomura analysts are overweight the IT services sector on: 1) continuation of strong growth momentum in IMS/BPO/Europe; 2) macro improvements in US raise the possibility of higher discretionary spend and better growth in FY15F; and 3) reasonable stock valuations supported by strong EPS growth. HCL Technologies and Cognizant remain top Buys in the stock market; Nomura prefers TCS over Infosys within other Buys.
The performance analysis of TCS and Infosys with special remarks is given below:
Bitcoins are not illegal even if it is a highly volatile and risky in nature but it may be misused for illegal trading activities, says Bitcoin Alliance
The Bitcoin Alliance India (BAI), a community of Bitcoin entrepreneurs, has agreed that Bitcoins is risky and speculative but has urged the government to clarify its legality. BAI also agreed with the Reserve Bank of India (RBI)’s notification regarding risk associated with virtual currencies. In order to examine the legality of Bitcoins, the Alliance appointed Nishith Desai Associates.
Speaking with reporters in Mumbai, Nishith Desai said, “A transaction in relation to Bitcoins must be for lawful consideration and should not be opposed to the public policy. However, exporting goods from India against Bitcoins would not be permissible as the proceeds of exports must be repatriated to India in terms of foreign exchange through normal banking channels. Thus, Bitcoins per se are not regulated by any authority as it is an Internet product.”
Last month, RBI’s warning on using virtual currency, including Bitcoin raised many question about legality and safety of virtual currencies, including Bitcoins. There have been serious legal issues regarding usage of Bitcoins in commercial transactions and doubts whether Bitcoins is a currency, a security, a commodity or something else.
Desai clarified that, “Our Bitcoins Practice Group examined the issue from techno-legal perspective and have found that Bitcoins are not illegal in India. This is in consonance with international approach. United States (US) considers Bitcoins as a legitimate payment alternative. US Senate Home Land Security and Government Affairs Committee and the Senate Banking Committee consider that virtual currency has legitimate uses.”
Nishith Desai talked on Bitcoins’ legal aspects in India and said, “If the Bitcoins are sold for a price in terms of money, Sale of Goods Act would apply but accepting Bitcoins against good should not attract the provisions of Sale of Goods Act. Provisions of Foreign Exchange Management Act (FEMA) would not be triggered especially when the transactions are intra-India. Even importation of Bitcoins would be legitimate if the transactions are carried out through proper banking channels. In any event as a commercial transaction the provisions of the Indian Contract Act would have to be complied with.”
Bitcoin is also highly speculative and has seen scores of users recently. Today, a single Bitcoin in India is valued around Rs51,053 which was just equal to rupee while it started in 2008, single Bitcoin’s value in US Dollars is $818.07. According BAI there are total 30,000 Bitcoin users in India.
BAI agreed that it is highly volatile and speculative and said that, some hedge funds in US have made more than 4,000% returns from Bitcoins. One should not deal in Bitcoins unless they have proper knowledge of technology and mechanism of Bitcoins. Bitcoins can be misused to do illegal trade activities and money laundering just like cash is being misused but it is more traceable than money especially when traded through Bitcoin traders.
Recently, Bitcoin providers saw their services hacked. Replying to a Moneylife question online security risks for Bitcoins, the Alliance said “It is difficult (to hack). But Bitcoin system can be hacked while doing transactions. Owing to these risks Bitcoin users have to be careful while operating and protect password of their e-wallets.”
What is Bitcoin?
Earlier, Moneylife had covered Bitcoin in detail in a primer which can be accessed here, in which we argued that Bitcoins have taken the world by storm because of its peculiar nature in being unregulated and hence subverting rules and regulations world over, to which RBI had issued a notice. We had also written about its highly speculative nature.
While explaining Bitcoin mechanism BAI said that, after every four years production of new Bitcoins will be half of its production. During 2009, about 50 Bitcoins were generated in every 10 minutes, which came down to 25 Bitcoins per 10 minutes in 2013. They said that, Bitcoin mechanism gets more and more difficult as it creates new Bitcoins it can create maximum 21 million Bitcoins in next 126 years. After 126 years there will be no new production of Bitcoins. Hence, price discovery in Bitcoins is fair, supply is limited and demand is increasing which creates the appreciation in value of Bitcoins, BAI claimed.
BAI said that, Bitcoin is a cryptographic digital product which provides digital transaction system. The Bitcoins look like a currency or money but it is not. It sounds similar to security, derivative, negotiable instrument or pre-paid instrument but its not. However, worldwide it is known as virtual currency, even the official website of Bitcoin clearly states that it is digital money and pretty much like cash for the Internet.
BAI said trading of Bitcoins should be done through organised channels they are also willing to share all the information with regulators and government and they committed to develop further standard of openness and transparency in collaboration with the regulators.
You may like to read more stories on virtual currencies:
RBI warns against usage of Bitcoin and virtual currencies