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Moneylife Foundation was joined by members of All India Bank Depositors’ Association, Mumbai Grahak Panchayat, All India Bank Employees’ Association and Mumbai Mahanagar Vyapari Seva Parishad in its campaign against the RBI’s foolhardy proposal to disincentivise the issuance and usage of cheques. The participants are in the process of framing points of action against the RBI move as well several other anti-consumer initiatives of banks
Moneylife Foundation hosted members of few associations as well as a activists at its Knowledge Centre to discuss the move of the Reserve Bank of India (RBI) and ministry of finance to levy charges on cheque usage. Opinions both for and against the move were discussed and then seriously deliberated for nearly two hours. The consensus appeared to be the same that Moneylife has been voicing since this issue came to light, that the move is premature, ill-conceived, impractical and hugely detrimental to the interests of consumers.
Sucheta Dalal, trustee of Moneylife Foundation, said, “We have already forwarded a memorandum to the RBI discussing our objections to the proposal. We’ve told them why online transactions are difficult. Not just senior citizens, literate persons are also often not tech savvy. Bank chairmen don’t know how to make transfers. When I talked with a member of parliament (MP), he didn’t know what NEFT or RTGS were. But we’re still being made to do it.”
Ms Dalal added that even though the banking system has technology at its disposal, bureaucracy continues to exist. There is an endless list of forms that need to be filled before electronic payments are approved and they need to be given physically. She also said that with this move, only banks stand to benefit. If people stop using cheques, it benefits the bank and if they don’t, the banks can earn money on it. With this, members of other associations were called upon to speak.
SS Bhandare, chairman, All India Bank Depositors’ Association then discussed the why incentivisation must be favoured over disincentivisation. He said, “It’s clearly a premature effort and a work-in-progress. There must certainly not be penalisation for simple use of a cheque. It’s unclear why such an audacious move is being made by the RBI, when its own study has shown that the bulk of the population that uses the banking system still prefers cheque payment.”
It was also reported by Moneylife how the decision to discourage cheque usage was scrapped even in the UK . Chartered accountant Nagesh Kini said, “Soon after I read the proposal, I submitted my comments to the consumer services department, but have not yet received an acknowledgement. India is just not geared to take this up. It was after all rejected in the UK, where the per capita income and literacy are higher. Even if the move appears to have worked in Ireland, quoting the example of such a small country makes no sense.”
A brief discussion then ensued about the need for a systematic study on the matter. It was suggested that the RBI take into account not only numbers but values and work toward a responsible system.
Shrikant Soman, secretary of the Council for Fair business Practices, then discussed the confusing signals being sent out by banks. He said, “Online and electronic payments are convenient and should be encouraged. And they are being used. For the past 10 years, it has been growing at a steady 30%. This should be enough. Yet the plan is to make cheques costly suddenly. The new proposal seeks to charge also the recipient of a cheque, which is absurd. This will certainly make people go back to cash. People will take the charge on cheques as a bad sign and go back to cash. So these are confusing signals.”
The failure of financial inclusion was discussed by Ms Vasundhara Deodhar of the Mumbai Grahak Panchayat. She said, “I agree with all that has been said so far. I want to add, though, that financial inclusion has not made much progress here. There has been limited effort and even that has not stabilised yet. The masses now need the banks for direct subsidy and cash transfer. This has just begun. It would be detrimental to push them also toward electronic payment at the same time. ECS is also not functioning as smoothly as claimed. Disincentivising cheque payment would be detrimental to the interests of the consumer.”
One member of the All India Bank Depositors’ Association, Ashish Das, however, found the proposal to be a good move by RBI. He said, “I think that there is a problem with the naming of the document. It should have used the word incentivisation, not disincentivisation. It, in fact, makes some good points. It says that all PSBs must make NEFT free if the transaction is of less than Rs1 lakh and 90% have already done so. Also, I think the problem of lack of knowledge on how to use these systems can be solved by teaching bankers how to use it.”
Mr Das’ contentions were, however, challenged by nearly every other participant. The fact that 90% of PSBs had made NEFT free was challenged. Also, the fact that training bank employees to handle RTGS and NEFT would solve the matter was challenged. The downsides to electronic payment, including the security risks, were then highlighted.
Some methods of electronic payment require the memorization of 16-digit numbers. If this number is written incorrectly, it will take a long time to recover. Rajendra Thacker of the Mumbai Mahanagar Vyapari Seva Parishad, gave an example of a client of his whose phone line was cut after ICICI Bank itself incorrectly entered the 16-digit code he had written correctly. Debashis Basu, trustee of Moneylife Foundation, also spoke about the inherent difficulties in running a business when one has to keep making online and electronic transactions himself.
Vishwas Utgi, chairman, All India Bank Employees’ Association, then discussed why basic banking services should be free of cost to consumers. He said, “Until 10 years ago, public sector banks gave all basic services free of charge. Then they started charging for every small thing. And it may get worse. PSBs have recently received a mandate to increase revenues from bank charges to 70% from 30% . I find the concept of these charges unbelievable. Depositors are providing banks with cheap money. They should not be charged. Part of the reason for the focus on electronic payments is that there is a vendors’ lobby in existence that wants technology companies to play a larger role.”