Regulations
The RBI's ATM usage rule flies in the face of its own Consumer Charter
RBI Issues Consumer Charter and then comes up with a new rule for ATM use that goes against consumer interests
 
The Reserve Bank of India (RBI) did two things in the last fortnight. It released a well-appreciated 5-point consumer charter (CC), and then, on 14th August, it issued a very anti-consumer directive restricting the free usage of automatic teller machines (ATMs) by customers. In effect, the positive signals sent out by the CC were negated by RBI’s action on ATMs. What is the connection, you may well ask. 
 
Well, for starters, while the CC was discussed with consumer organisations and stakeholders, RBI completely ignored their suggestion that a motherhood statement about how to treat customers makes no sense without consequences for unfair treatment. At the least, this would require a drastic rewriting of the Banking Ombudsman (BO) Act as well as how the BO functions currently. 
 
RBI may even want to consider a separate consumer protection legislation which prescribes a clear process of lodging complaints and their redress with declared penalties. An important part of such legislation would be the conversion of persistent complaints about a bad product or service into a class action, so that all consumers are benefited without the need to file individual complaints. None of our financial regulators takes up decisions on behalf of a class of consumers and, since banks sell insurance and mutual funds, this attitude affects bank customers in multiple ways. 
 
Now, consider how this plays out in connection with RBI’s diktat to restrict free usage of ATMs. Currently, banks have the freedom to decide their charges and interest rates without reference to RBI. So, if some banks found it prudent to curb usage or disallow third-party transactions, they could have gone ahead and done it without RBI’s intervention. So why the RBI directive? To make a anti-consumer action look like a regulatory diktat?
 
The Indian Banks Association (IBA) used its influence on the central bank to ensure that angry customers do not vote with their feet and switch banks. Getting RBI to issue a directive removes the problem. 
 
It also ignores the fact that IBA behaves like a cartel under RBI’s benign watch. That is how all banks act together to charge for mobile texts and debit cards and ensure that interest on savings bank deposits remains a low 4% at all but a couple of new banks. 
 
Now, consider how banks have got RBI to restrict the usage of ATMs by urban consumers. RBI’s press release says, “The policy framework of the Reserve Bank has aimed at fostering the growth of non-cash payments.” Hence, RBI has issued a directive, restricting free ATM transactions from 1st November for urban consumers in six cities on the grounds that “there is a growth in access points and associated infrastructure costs in larger towns and cities.”
 
So, RBI’s way of ‘fostering non cash payments’ is by sanctioning punitive charges and remaining silent about the imposition of ‘convenience charges’ on online bookings by airlines, cinemas and theatre companies. This is completely contrary to the Damodaran Committee’s recommendations to ‘encourage and give incentives’ to customers, to switch to electronic transfers. 
 
But RBI, which has come out with a brand new consumer charter, is clearly not in listening mode. Moneylife Foundation has submitted two memorandums to RBI protesting against its attempts to penalise savers. The first was in February 2013 on its plan to “Disincentivize Cheque Usage” through punitive levies and charges; the second was in January this year against the move to restrict usage. Both have been ignored in favour of bankers’ lobby. 
 
So what exactly happens on 1st November in terms of ATM costs? Under the new rules, you are only entitled to five free ATM transactions at your bank and these would include non-financial transactions to check your balance or ask for a chequebook. 
 
Further, anything beyond three transactions at another bank’s ATM located in six metros (Mumbai, Delhi, Bengaluru, Chennai, Hyderabad and Kolkata) will be charged Rs20 per transaction. Those in smaller towns and holders of no-frills accounts will continue to have five free transactions. 
 
Let us again examine why this action has outraged customers. Customers in metros affected by RBI’s action prefer to use private bank ATMs for several reasons. These are better maintained and have better security and surveillance.
 
Contrary to RBI’s belief that service quality drives the customer’s choice of banks, most often, people are tied to a bank because of salary accounts, scarce lockers, electronic payments for utility bills, credit cards or loans. It is not easy to cut these strings frequently. 
 
As it is, the decision to charge for hitherto free services, like mobile text alerts and higher charges and increase in debit cards fees, has become a source of irritation and discourage multiple bank accounts. Angry and suspicious customers want to know why nationalised banks continue to expand their ATM networks so rapidly if transactions are unviable. 
 
Some banks tell us that it is to extract a fee from small traders and businessmen who tend to use a savings account for their business needs. If this is true, the high ATM charges will only push this segment to switch to cash rather than generate additional revenue.
 
If RBI has done any detailed study or investigation on ATM usage, it has certainly not chosen to share it with us consumers who are affected by its diktat.
 
It is also important to note that RBI did not succumb to pressure from the banking lobby, as long as deputy governor Dr KC Chakrabarty was in charge of customer services. He was on record saying, “It is ridiculous that banks are charging customers for withdrawing money and that too from their own ATMs—it never happens anywhere.”
 
Let us now examine RBI’s move in the context of the recently issued CC. First, it discriminates against urban customers, but because it is RBI’s diktat, the rule does not apply. Also, while the action seeks to impose a cost on the customer, there is no obligation on banks to ensure service quality. The circular makes no mention of it.
 
A reader, Trivendra Sharma, points out that ATMs of nationalised banks are often out of order, sometimes because poor quality machines cause currency to get stuck in the machine. This forces customers to use other bank ATMs. Nagesh Kini, a consumer activist, points out that banks do not necessarily have a 24x7 complaints centre. Also, nationalised bank ATMs often run out of currency during long bank holidays (there are three 4-day holidays this year); there is no obligation on banks to ensure a top-up during this time.
 
Veeresh Malik, a Moneylife columnist and activist, raises other issues. He says all bank ATMs must have a centralised identity number and the facility to call/type out complaints regarding non-functional ATMs or those that have run out of cash. Banks must be penalised for poor service, with specific compensation to the customer.
 
Accessing data until April 2014 from RBI’s website on the total number of ATM transactions and their value, Mr Malik finds that the average transaction size is Rs3,146.85. This again suggests that charging for ATM transactions (beyond five) is aimed at small businesses and not because tiny transactions by account-holders impose a huge cost burden. 
 
Mr Malik also argues that RBI must direct banks to use plain paper to print transaction receipts, not carcinogenic thermal paper that fades quickly. They must ensure zero-incidence of fake Indian currency notes (FICN) in ATMs, with a detection and penalty system in place. 
 
The decision to permit banks to levy charges on ATM transactions is not, in itself, a move that should shatter consumer confidence. But, by choosing to issue a diktat on what should have been a decision by individual a reciprocal service obligation on banks, RBI has ended up signalling that it does not particularly care about the consumer. In that case, the CC will end up being a meaningless piece of paper.
 
Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at sucheta@moneylife.in

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COMMENTS

Veeresh Malik

3 years ago

It seems that enough people have not actually complained about this issue of charging for ATM usage as yet. In response to my complaint on the PGCell, I received a response by phone from of all people the Hindi Officer of my Bank's Regional Office, telling me that nobody else had complained about ATM usage charges, why did I?

Please, more people need to escalate this issue to the Government of India, and soon.

http://pgportal.gov.in/

REPLY

rs

In Reply to Veeresh Malik 3 years ago

Is it necessary that one and all should complain? Can they suo motto understand and appreciate the grounds under which ATM card issue has emerged???

rs

In Reply to rs 3 years ago

Is it necessary that one and all should complain? Can they not suo motto understand and appreciate the grounds under which ATM card issue has emerged???

Dayananda Kamath k

In Reply to Veeresh Malik 3 years ago

they are statistically proving the 100 percent response. today any reply given by the bank or companies how absurd it may be to your complaint will be accepted by banking ombudsman, sebi, rbi etc and expect you to respond without going through the reply. it is the best way to frustrate the complainant.

sumeet

3 years ago

RBI is now for banks and not for consumer. As per many banks' own internal assesment, a customer visit to a branch cost Rs 100/- to Rs 200 to bank (incl salary etc) vs 15/- to Rs18/- for ATM. In a garb of RBI, all banks want to earn extra fee income. Why the hell are they charging Rs150/- to Rs200/- for debit card, Rs 100/- for account closure (irrespective of vintage), SMS charges, NEFT charges etc.. I think, I am better off keeping the cash at my house and appoint a security guard..It might be a cheaper option :-)

p s deekshitulu

3 years ago

charging of ATM users is not justified. ATM is an extension of Bank Branch which helps the Bank in reducing its transaction cost and customers to have easy access to banking services. when a customer is not charged for using the services of a bank across the counter, then why to charge him when he is using the ATM? At many ATMs, the security aspects are totally lacking. Before allowing the Banks to charge for ATM transactions, RBI should ensure that ATMs are properly maintained by Banks.

Dayananda Kamath k

3 years ago

iba is even above supreme court judgments. many a supreme court judgments regarding service matters are not implemented in banks due to no guidelines from iba by banks. quoting there is no iba guidelines. the day supreme court punish iba for contempt all these things will stop. rbi has failed in every respect as a regulator for banking regarding protecting interest of bank customers. and is helping in every way to loot the client and economy through their dictates.

REPLY

rs

In Reply to Dayananda Kamath k 3 years ago

It is very clear that various moves and statements are made without clear fore thought and later common man is made to suffer.

Priya

3 years ago

It was ridiculous to see Mr. Adithya Puri of HDFC justifying stating that it was like "Toll road" fee.. When did all the roads in the country become "Toll Roads".
Also ATM is not a toll road, alternative of servicing the customer through their branch is more costlier.
Banks have become arrogant and want to ding the customers with all the charges.
Most affected are going to be the ignorant and not so literate customers, students, young professionals living in PG hostels, who also need to withdraw money only when they need and not keep the money hoarded.

REPLY

Dayananda Kamath k

In Reply to Priya 3 years ago

toll road is also looting only. if you are paying toll for the road then why you should pay road tax and and cess etc to the govt. why nhi should collect premium for setting up toll roads. you can not justify a wrong by pointing out another similar wrong.

rs

In Reply to Priya 3 years ago

It may be HDFC way, not concerned about common man and aiming only profits.

Aniruddh Patankar

3 years ago

RBI needs to devise a route by which a customer is forced to use another bank's ATM since his own bank's ATM is "Out-of-Order".

REPLY

rs

In Reply to Aniruddh Patankar 3 years ago

Tats a good idea

R Nandy

3 years ago

The charge might be unacceptable but practically how many people will be affected? .How many householders are actually making more than 5 transactions in a month? Disciplined people will manage with at max 2 transactions in a month.

Sorry to say,the ATM machine is not a replacement for the house Almirah,where we withdraw 200-300 Rs every second day.Certainly the disciplined users of ATMs should not be cross subsidizing the daily users of the machine.

REPLY

rs

In Reply to R Nandy 3 years ago

I personally do draw between 2-5k around 7-8 times a month. I mostly confine to my locality and don't travel much. Just imagine the working force who are always on the move. Certainly all will be having around 1k as their petty cash.

Indus

3 years ago

RBI should be abolished.....they are keeping interest rates high to fleece consumers...

REPLY

Ashok m Rane

In Reply to Indus 3 years ago

RBI is the controlling body for all banks and Monetary Policies. It can not be abolished as that.

Dayananda Kamath k

In Reply to Ashok m Rane 3 years ago

banks have even looted you under the guise of floating rate and prime
rate without your knowledge with active support of rbi. further when they mandate restriction of free atm use. why they can not ask banks to pay monthly compounded interest on deposits as they charge monthly compounded interest on advances. and even though rbi has permitted vide guidelines in this regard banks are not following it. in equity also banks must give monthly compounding for deposits as they charge monthly compounding for advances. here you can see the clear double standards of rbi regarding banks and their clients. do we need such a regulator who abdicates his first duty to protect the interest of clients.

MG Warrier

In Reply to Indus 3 years ago

Indus, my personal request is, please withdraw this demand. RBI is bread and butter for many and the only remaining support for RBI pensioners like me. One Srikrishna (FSLRC) has recommended something close to demolition of RBI and if people like you ask for straight demolition, someone may do exactly that. Then, coming back to your complaint about interest rates, these were deregulated long back and now the impression being created that lending rates are dependent only on RBI’s base rates is just an excuse being developed by government and banks to keep the burden of defence on the broad shoulders of RBI Governor. Let RBI survive. There are some reasons for that institution to survive other than the one I mentioned also. Like currency management, public debt management, regulation of financial sector and so on.

S Bethamangalkar

3 years ago

RBI wants to promote cash transactions over paperless it seems. Instead of promoting competition which is the only way to ensure quality service, we have the usual bureaucratic approach.
IF there is a petition against this move, i am willing to sign it.

Amiit Gupta

3 years ago

Why cant we send a letter to RBI Deputy Director Mr Mundra via moneylife foundation & request him to work on this customer related issue..on the same time moneylife will fix a date on which will send letters to rbi with our issue which we all mentioned in this commennt.

lets complaint together same day to RBI Deputy director , sure then they will wake up with their team.



REPLY

rs

In Reply to Amiit Gupta 3 years ago

Policy makers need to have a considered, firm and constant view on issues and should go by that. But of late, policies at the time of introduction and later undergoes drastic change defeating the very objective. When ATM services are restricted so, why customers should keep their money in the low yielding savings account and struggle when they need it back. By rendering the service in an efficient manner, banks should rope in more and more accounts and win customer confidence. Can anyone boldly say our bank's ATM works 24*7 and all basic services are available through out giving a margin during servicing time.

rs

3 years ago

What if the card issuing bank's ATM/s is non-functional for sometime / a few days in a particular locality (many a time this is felt). Customer has no option but to go to other working ATMs. Who should be penalised for this.. What is RBI's stand on this..?

REPLY

Ramesh B Mhadlekar

In Reply to rs 3 years ago

RBI will never look into your genuine grievances.They are interested only in how to claim perquisites,make arrangements for their jobs after retirement etc.

Radhakrishnan Subbiah

3 years ago

Good, another confirmation that Banks can legitimately enjoy your money at your cost... increasing by day. Is it not time that people think of starting their own banks or some other means of transacting at less cost?. Any thoughts for discussion ?. Certainly banking is the most lucrative business now.. it is worthwhile to think on these lines. If we add up all the charges by the banks , for the diff transactions that we make, it could very well exceed the SB A/c interest. On top of this there is another entity that wants to charge tax on this interest. Can you beat it for the joke of it ?. This is My India !!

mohammed faisal

3 years ago

very nice,
money life foundation
find out point to point and analysis,bank customer problem,

also request to you please raise question about bank pasbook size which should also be unique size pan india for all banks compulsary to print data releated bank trasation and should be front size should be also visible for like retired person and old age,
also face problem releated miss printing in bank pass book like again printing on pre pinted entry and old data also not usful and new data also miss they have no option to reprint from next page optional software as some employee say take statment of account,for see detail which charjable from customer,
mohammed faisal
( financial advisor ) jodhpur

Ashok m Rane

3 years ago

There is no harm in restricting ATM usage at other Banks ATMs. However there is no rationale in restricting ATM transactions on own Bank's ATMs. These restrictions are uncalled for and r not acceptable. It will certainly increase workload at Bank counters and will create inconvenience to customers.RBI should rethink.

REPLY

Dayananda Kamath k

In Reply to Ashok m Rane 3 years ago

then why are they giving licence to white label atms. to create one more agency to loot and payment banks. when you can not manage the existing banks properly why create further category of banks. is it to create a black economy and facilitate its functioning.

Vivek Sanghi

3 years ago

Banks not increasing their ATM population and want to piggy back the growth of other Banks ATM network for free.

So Banks with high population cover for the cost and maintenance and service the customer of the other banks for free.

RBI should mandate ATM population for each bank based on the number of customers with time span to implement and then we have a level playing between banks.

SAT upholds NSE decision to refuse Emkay Global's plea

According to SAT, if trades are executed due to negligence or breach of duty they cannot be considered material mistake and therefore not qualify for annulment

 

Holding on to the sanctity of trades on the exchanges, the Securities Appellate Tribunal (SAT) on Thursday upheld National Stock Exchange (NSE)'s decision to refuse Emkay Global Financial Services plea for annulment of erroneous trades executed in October 2012.


At the same time, SAT has asked NSE to review trades executed by Emkay with two brokers - Inventure Growth and Securities and Prakash K Shah Shares and Securities.


The case relates to orders entered by a dealer of Emkay on 5 October 2012, that had led to a flash-crash of over 900 points (fall of 15.5%) in the NSE's benchmark index Nifty, forcing the bourse to temporarily halt trading.


Emkay had approached SAT after NSE refused to accept its request for annulment of the erroneous trades.


In a final ruling dated 26th August, SAT has upheld NSE's contention that norms related to trades on exchange should be inviolable "to ensure sanctity of dealings on the exchange".


"If trades are executed due to negligence or breach of duty they cannot be considered material mistake and therefore not qualify for annulment," SAT said.


As per the tribunal, 'material mistake in the trade' would be attributable to unforeseen circumstances, which vitiate sanctity of the trades executed on exchange.


"Breach of duty/negligence would not be unforeseen circumstance that can be said to vitiate the trades executed on the exchange," SAT said.


Among others, SAT noted that Emkay had not installed a "validation mechanism" before entering sell orders and was also negligent in transmitting erroneous trades from the dealer's terminal to the NSE's server by ignoring four to five level checks that were available in the system.


Moreover, SAT also rejected Emkay's contention that NSE's trading system was faulty and in violation of market norms on grounds that the matter was pending before Sebi and it "would not be proper" for the tribunal to comment on the same.


However, SAT noted that while Emkay Global during the trades had incurred losses of Rs51 crore on account of sell orders, two counter-parties - Inventure Growth and Securities and Prakash K Shah Shares and Securities - had made huge profits running into several crores of rupees.


According to SAT, violations committed by - Inventure Growth and Prakash K Shah Shares - "were serious violations" and NSE should have considered that the trades were "vitiated" on account of such violations by the two brokers.


Accordingly, the matter in this regard has been remanded back to NSE for fresh consideration.

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SEBI gets extra power to tackle ponzi, MLM schemes as govt notifies Act

Giving more teeth to SEBI for clamping down on illicit money-pooling schemes and other frauds, the Government has notified a new law empowering the regulator

 

The union government has notied the Securities Laws Amendment Act that would empower market regulator Securities and Exchange Board of India (SEBI) to pass orders for attachment of properties, arrest of defaulters and to access call data records.

 

The Securities Laws Amendment Act, which was cleared by Parliament earlier this month, amends all legislations governing capital markets, would also facilitate setting up of a special SEBI court to fast-track investigation and prosecution process, including by granting approval for search and seizure operations in suspected cases of frauds.

 

The Act, which has come into force through a gazette notification dated 25th August, is part of the government and regulators’ efforts to tighten the noose around fraudsters in the wake of several cases of illicit money-pooling activities including by ponzi operators in various parts of the country.

 

The new Act has as many as 57 clauses to amend various sections of the SEBI Act and two other related legislations.

 

The Bill was passed by the Lok Sabha on 6th August and in Rajya Sabha on 12th August.

 

The notification comes more than one year after the first ordinance was promulgated in July 2013 to grant these additional powers to SEBI. The ordinance was promulgated for the second time in September last year, followed by a third ordinance in January, as a bill could not be passed in Parliament at that time to grant permanent powers to SEBI.

 

The third ordinance also lapsed late last month, leaving SEBI without these extra powers which were used by the regulator in nearly 1,500 cases during their validity period.

 

The ordinance, which had 30 clauses, was brought in against the backdrop of lakhs of small investors being duped by numerous fraudulent investment schemes across the country, like in the alleged Saradha scam in West Bengal.

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COMMENTS

Vaibhav Dhoka

3 years ago

Hope SEBI acts in investors intrest the fact is SEBI had powers but used for benefits of companies brokers etc.

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