TDS certificates should be sent to customers: RBI to banks
The banking regulator today announced 10 points that banks must work on to improve services for customers
The Reserve Bank of India (RBI) today announced that banks must issue certificates for tax deduction at source (TDS) duly completed, for account holders, and dispatch to their mailing addresses.
This was one of the decisions taken at its annual conference on banking ombudsman that was held on Monday. The RBI also listed nine other action points to improve bank customer services, which includes pre-payment charges on floating rate mortgages, providing customers a view of account using technology and creating awareness of the banking ombudsman scheme.
TDS has been a big harassment for customers and not too long ago Moneylife Foundation had sent a memorandum on the TDS matter to the finance ministry and the RBI on the issue. The memorandum to the RBI highlights the TDS problem for bank depositors and suggests that income from fixed deposits should be exempt from tax. It also proposes that banks found to be deficient in services, wrongful deduction of tax, not providing accurate tax certificates, or uploading inadequate or wrong information, should be awarded exemplary punishment either by the banking ombudsman or the RBI. (Read, ‘Moneylife Foundation sends memorandum on TDS to the FM, RBI’.)
Among the other issues that have been listed is the need to provide a long-term fixed rate housing loan, compensation for loss due to unauthorised transactions through ATM/Internet and proper monetary compensation for mental harassment suffered by the customer.
The RBI stated that "banks must not recover pre-payment charges in floating rate loans. Banks may offer long-term fixed rate housing loans to their customers and address their asset liability mismatch (ALM) issues by recourse to the interest rate swaps market. Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it, to borrowers and, thus, banks only substitute interest rate risk with potential credit risk. The bank will, however, be free to recover / charge appropriate pre-payment penalties in the case of fixed-rate loans."
The Indian Banks' Association (IBA) has been asked to standardise the most important terms and conditions of at least 10 important banking transactions and circulate among banks for adaptation. It also said that banks should initiate the process of providing one view of the bank account, including deposits, loans, etc, using technology such as core-banking solutions and complete this within a year.
The RBI said that "under the Banking Ombudsman Scheme, banking ombudsmen will annually share with the local media, information regarding complaints received and resolved, including important cases and awards given," towards creating awareness.
On disputes in ATM/Internet-based transactions, the RBI said, "In the event of any monetary dispute involving the customer and the bank, the onus should be on the bank to prove the customer's negligence or mistake. The customer must be compensated for losses arising out of customers' non-authorised transactions."
The action points lists the need for creating awareness of customer services in banks through a series of events to be conducted by the RBI, in which bank customers, bank officials and banking ombudsmen will participate.
The RBI also highlighted the issue of monetary compensation for mental harassment suffered by bank customers and it is examining the issue along with the IBA. "Issues that may receive attention in the analysis would be whether only actual loss should be considered for compensation, whether mental harassment issues can be codified for compensation, and whether compensation should be capped, or whether the policies of the banks' boards on compensation should include mental harassment as a ground for compensation," the RBI stated.
It has also asked banks to initiate steps to incorporate in their code of 'Fair Practices to Customers', insurance of some reasonable amount on their customers' credit and debit card transactions, providing periodical loan statements to small borrowers, and conveying to borrowers information on the annualised all-in cost (annual effective rate) on their loan accounts.
The RBI has also asked banks to give their views on the recommendations of the Damodaran Committee for immediate implementation.
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