Far too many glitches in banks' IT systems affect consumers adversely. Who checks whether redressal systems exist and operate in a fair and equitable manner? RBI should work at depositors' protection instead of sitting in an ivory tower and producing reports on "disincentivising cheque usage" by penalising depositors

One of the many issues that Moneylife has taken up with the Reserve Bank of India (RBI) is the need for a technology audit of banks and the systems and processes that they adopt. While RBI’s department of supervision inspects banks, it is not clear if this covers the core banking technology that now drives all big bank operations. Over the years, individual banks have often configured systems in a manner that hurt depositors’ interest. And, since technology changes are complex and outsourced, the process of incorporating even small, but necessary changes is both cumbersome and expensive.

For instance, a few years ago, HDFC Bank insisted that it could do nothing about the fact that its system was configured to deduct TDS on fixed deposits from the principal, if the accumulated interest was insufficient in the quarter that it was deducted. Another bank auto-debited one more EMI (equated monthly instalment) when a loan was closed through pre-payment. It saw nothing wrong in dipping into the customer’s funds because its systems were badly configured. Such problems continue to be detected and depositors are left to the mercy or goodwill of the concerned banks to set things right. Here are a few issues that cropped up in the month of May 2013.  

On 10th May, Moneylife reported how “a human error in setting parameters” at the State Bank of India (SBI) led to a 40% tax deduction at source (TDS) from tens of thousands of special term deposits. The reversal process is complex because its automated systems had done a lot more than merely deduct tax at source. When accumulated interest wasn’t sufficient to cover the TDS, the deposits were prematurely broken. The process cannot be reversed automatically by re-creating the deposits, since the principal was already credited to the respective savings accounts without informing customers.

Most of us expect our banks to be accurate in their calculations and do not even check for errors. But Moneylife reader Naresh Nayak, a techie, says, he got SBI to reverse a wrong deduction of nearly Rs52,000 in 2010 and has found similar errors earlier too. Mr Nayak says, “The TDS deduction system has a glitch. It cannot ascertain the amount of interest accrued for a financial year for deposits that span across financial years. In these cases, it incorrectly calculates a higher amount of gross interest accrued.” We checked with TCS Limited, which has supplied the core banking software to SBI, its officials pin the blame on bank officials for entering wrong parameters.

On 12th May, clients of a payment gateway received this email: “This is to inform that, due to a technical issue we are facing fluctuations in processing transactions in SBI & HDFC Net banking payment options. This will impact customers who try to avail products/services on your website and choose to use SBI or HDFC Net banking payment option… We are in communication with the bank teams and we will update you once the issue is resolved. Inconvenience caused is deeply regretted. Feel free to get in touch with us, in case of any queries or clarifications.”

We checked. SBI told us that “there were no fluctuations” but its Internet banking was not available until Sunday for a planned upgrade. HDFC Bank took the issue more seriously and insisted that the payment gateway company must clarify the issue. So, on 13th May, it sent out an email saying, “earlier communicated fluctuations in processing payments using HDFC Net Banking payment option has been resolved. We apologize for the inconvenience caused.” So it confirms the technology issues, right? Well, think again.

Even more furious, HDFC Bank demanded a further clarification. So, on 14th May, there is a third clarification from the payment gateway saying that the 12th May email about fluctuations in HDFC Bank Net banking payment option “due to a technical issue, was erroneous. There was no technical issue and unavailability during that period was due to scheduled downtime. Inconvenience caused is deeply regretted.” Since Moneylife was asking the questions, we know why three emails were sent, but won’t other customers be totally flummoxed?

An e-voucher is a wonderful way of offering discounts and benefits for most companies. But, when it comes to a bank, is there a danger that the idea will become a phishing-magnet? What happens if cyber criminals produce authentic looking e-vouchers where the net banking details, PIN and password are captured by hackers? This is a question we asked HDFC Bank which sent out e-vouchers for Rs250 each earlier this month. The Bank accepted that the fears were genuine and that it could be misused and decided to drop the idea. But should such experiments be a matter of trial & error when it exposes customers to risk and hardship?

At Moneylife, we think that RBI as a banking regulator needs to have a crack IT team that is constantly monitoring the various tricks deployed by cyber-fraudsters to dupe gullible and not-so-tech-savvy people. This group must be mandated to conduct a technology audit of bank systems and software. It must also investigate all technology-related complaints including ‘unstable systems’, wrong deductions and excessive vulnerability to phishing attacks.

And, it must be the first on the scene when new kinds of tech crimes are reported so as to provide direction to the banking ombudsman on complaints relating to hacking, misuse of credit and debit cards through cloning, loss of customer data and the constant innovations in phishing techniques. RBI should work at depositors’ protection instead of sitting in an ivory tower and producing reports on “disincentivising cheque usage” by penalising depositors.