Banks cannot insist on ID proof to cash bearer cheque
Overturning an order of the Maharashtra State Consumer Disputes Redressal Commission, the National Consumer Disputes Redressal Commission (NCDRC) last week termed the refusal of HDFC Bank to hand over cash to a bearer of a cheque, after verifying his credentials through the account holder, as “a clear case of deficiency in service”.
 
The order from NCDRC, issued on 15 March 2017, states, “No doubt the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the Bank Manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”
 
The order relates to a consumer complaint filed by Mumbai resident Prakash Sheth against HDFC Bank. Sheth required Rs3 lakh to be deposited in the hospital for treatment of his ailing mother, in 2010. He requested his nephew, Chirag, for the money. Chirag gave a bearer cheque to Sheth, who then presented the bearer cheque on 7 May 2010 at HDFC Bank. The cashier in the bank asked him to come back at 4pm because of insufficiency of funds. When he returned at 4pm, the cashier asked for his photo ID, which Sheth was not carrying. The cashier then called up Chirag to seek verification of issuance of the bearer cheque. Chirag confirmed it, but the cashier refused to honour the cheque and Sheth was asked to meet the branch manager. The branch manager too checked with Chirag to confirm that he indeed had issued the cheque. Despite that, the manger insisted that Chirag should personally come to the bank, which the latter was unable to. The branch manager then refused to honour the cheque. 
 
Claiming this to be deficiency in customer service, Sheth filed a complaint in the Consumer Forum at South Mumbai District, seeking compensation to the tune of Rs1 lakh towards mental agony and physical harassment. Sheth also appealed for a directive to the bank to stop this practice. The bank was served a notice, but it claimed that it had rightly not honoured the cheque as per guidelines from the Reserve Bank of India (RBI). The District Forum therefore dismissed the complaint. Subsequently, the Maharashtra State Commission too dismissed Sheth’s petition, stating that the bank had rightfully adhered to RBI guidelines.
 
As per RBI guidelines, banks have been advised that “in case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs50,000, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity and address should be verified”.
 
However, Sheth’s contention was that two officials of HDFC Bank had personally cross-checked with the account holder, which proved that it was a clear case of harassment. 
 
In this case, while the State Commission dismissed Sheth’s petition, it upheld that although Sheth was not an account holder of HDFC Bank, he still was a consumer. The Commission observed “…the consumer is not only the person who hires or avails the services of the service provider but the beneficiary also. It is argued that once the account holder had issued a cheque in favour of someone, he automatically becomes the beneficiary and therefore he is a consumer”.
 
Sheth then approached the National Commission. In its order on 15 March 2017, the Commission stated “…from the affidavits of Chirag Natvarlal Sheth and Prakash Sheth (the complainant), it is amply proved that the bank telephonically contacted Chirag Sheth twice to verify whether or not he has given bearer cheque to the complainant and the account holder Chirag Sheth confirmed the said fact. From the above, it is clear that the bank officials were categorically informed by the account holder that he had issued the cheque and given it to Prakash Sheth. Therefore, he, in our view, was the beneficiary of the cheque and as such he is covered under the definition of consumer, which includes the beneficiary of the service hired or availed. Thus, the complaint is maintained.”
 
The NCDRC also pointed out that in response to an application under Right to Information (RTI) filed by the bank, a part of the response clearly states that, “the bank should not ordinarily insist on the presence of account holder for making cash withdrawals in case of ‘self’ or ‘bearer’ cheques unless the circumstances so warrant. The banks should pay self or bearer cheques taking usual precautions.”
 
“From this it is evident that Reserve Bank has cautioned banks in the country to be careful while encashing the bearer cheques if the amount exceeds Rs50,000 and insist on the verification of ID, as also the address. No doubt, the complainant had not furnished his ID, but the fact remains that admittedly not only the cashier but also the bank manager separately rang up the account holder on his mobile number, who verified having issued the subject cheque and gave clearance for encashment. The bank officials, however, declined to encash the cheque. This, in our view, is a clear deficiency in service.”
 
Another rule from RBI states, “In the event the individual tendering the instrument is not carrying the identity, and there is urgency to pay, the transaction to be referred to the branch manager. The branch manager shall make appropriate enquiries as deemed fit and shall use his discretion to allow the transaction. Such discretion to be used judiciously as strict one- off cases, only upon satisfactory confirmation of the bonafides of the transactions.”
 
The National Commission declared HDFC Bank’s stance in not honouring Sheth’s cheque as ‘deficiency of service’ and asked it to pay compensation of Rs10,000 to him for harassment and humiliation.
 
Prakash Sheth says, “Most banks harass such non-account holders who come with bearer cheques. Mine was perhaps the first challenge before a legal forum. This case will spread literacy amongst consumers or bearer cheque holders, and will hopefully be a lesson to similar banks who adopt this malpractice.”
 
Here is the order issued by NCDRC…
 
 
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting, which she won twice in 1998 and 2005, and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book, “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte”, with Vinita Kamte, and is the author of “The Mighty Fall”.)
 
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COMMENTS

Priyanka Sippy

3 months ago

This is how fradusters invited.
If in the same case it was paid and found to be the case of fraud,the same person sud had filed the complaint opposite of what he did and claimed for the money too.
A banker do all in intention of safeguarding customers hard earned money, never intend for harrassment.

SKHK GAUSIYA

9 months ago

obviously, a bearer chq should be encash from the cash counter without showing any identity...thats why it is called "bearer chq"

Anup D

1 year ago

congrates to the complainant. bank manager n staff r v rude when the turn down bearer cheue which is just an instrument made to allow account holder to pay anyone he wishes. the onus of safely managing this lies with ac holder. bank is oblidged to honor a bearer cheque . i hv faced a turndown by manager of BOI. How do i proceed to take an action.?

Sudhakar Ojha

1 year ago

RBI master circular on customer service says that Banks shounot insist on presence of the Account holder in case of self or bearer cheques.

Sudhakar Ojha

1 year ago

As a first steps the RBI and BCSBI should force Banks to put their process for handling Bearer cheques and Self or bearer Cheques on their web so customers know what to do if they need to issue such cheques. At present every cashier has his own interpretation of the Negotiable instruments act.

Suketu Shah

2 years ago

The fact is HDFC Bank was harassing the customer as they didnot have 3 lakhs with various nonsense excuses.HDFC Bank is the expert is such things and no bank in India can compete with them when it comes to harassing customers.

REPLY

Suketu Shah

In Reply to Suketu Shah 2 years ago

HDFC Banks's thinking is so myopic that after melting out the harassment they still expect you to do business with them and not leave and blacklist them!!!!!!!!!!!!!!

R Balakrishnan

2 years ago

This is not a good thing. As a bank cashier, I can ask for a separate money receipt from whoever collects the money from the counter. A mere signature on the reverse is a meaningless scribble. So as a bank, I can ask for a proper, stamped receipt for having received the money against the cheque. This order needs to be overturned. Anyone collecting cash against a bearer cheque should be made to produce an ID.

REPLY

Sudhakar Ojha

In Reply to R Balakrishnan 1 year ago

And you are above things like Negotiable instruments act of Parliament and Master Circulars of RBI ?

B. Yerram Raju

2 years ago

Bearer is always a bearer and bearer will become the 'holder in due course.' Bank shall pay the bearer the amount mentioned in the cheque without demur and bank will not run any legal risk. There is no instruction to my knowledge from the RBI that the bearer instruments shall have the evidence of the third party payee. Further, NI Act and various judgments on the issue have been very clear absolving the banker who pays the bearer from any risk. Unfortunately, banks; counters are handled by tech-savvy persons with least domain knowledge and the controlling officers go by what the system ordains. System is tuned to paying order instruments that require Id proof for every payee of the instrument. Banks started issuing 'Order' cheque leaves on savings bank accounts that earlier used to be issued only bearer cheque leaves only. It is time that the RBI has to revisit the NI Act and brings to bear on the banks the essentials for compliance because the Banks understand only the RBI instructions and not the banking laws of the country in the present day.

B. Yerram Raju

2 years ago

Bearer is always a bearer and bearer will become the 'holder in due course.' Bank shall pay the bearer the amount mentioned in the cheque without demur and bank will not run any legal risk. There is no instruction to my knowledge from the RBI that the bearer instruments shall have the evidence of the third party payee. Further, NI Act and various judgments on the issue have been very clear absolving the banker who pays the bearer from any risk. Unfortunately, banks; counters are handled by tech-savvy persons with least domain knowledge and the controlling officers go by what the system ordains. System is tuned to paying order instruments that require Id proof for every payee of the instrument. Banks started issuing 'Order' cheque leaves on savings bank accounts that earlier used to be issued only bearer cheque leaves only. It is time that the RBI has to revisit the NI Act and brings to bear on the banks the essentials for compliance because the Banks understand only the RBI instructions and not the banking laws of the country in the present day.

REPLY

Sudhakar Ojha

In Reply to B. Yerram Raju 1 year ago

Yes most of the staff are unaware of banking rules and processes and are merely acting as data entry operators

Meenal Mamdani

2 years ago

When I read the headline of this article, I thought that the bearer had not provided any identification. But it is obvious that the writer of the cheque was guaranteeing that it was OK to disburse money as he assured both the teller and the manager on the phone.
The only reason to insist on the letter of the law rather than the spirit of the law is the mindset of Indian officials. They get drunk with power and use every opportunity to be unhelpful to customers. They want the customers to pay respect to them rather than recognizing that this is not license-raj any more and ordinary people are going to demand their rights.
If I was the supervisor of the manager of this bank branch, I would send him to a reeducation camp. He is not fit to work in a branch where consumers know their rights.

SuchindranathAiyerS

2 years ago

Banking acts on law, accounts, economics and customer relations. India's bankers have IAS/IPS incompetence instead

REPLY

B. Yerram Raju

In Reply to SuchindranathAiyerS 2 years ago

Why identify incompetence only with only civil services? They are there every where. There are efficient persons in every sector and 80 to 20 principle is holding the country still. in tact.

Arun

2 years ago

Why does RBI require that banks verify the address of the bearer of a cheque? Isn't it sufficient to verify just the bearer's identity? Also, what do banks verify the address against - does the cheque specify the address of the bearer?

SRINIVAS SHENOY

2 years ago

When making cash payments of any bearer cheque, payments should be made in good faith and without negligence then only the paying banker is protected under the NI Act.

Gurudutt Mundkur

2 years ago

With both the Officer and the Manager having verified from the drawer of the cheque, it certainly was not necessary for further identity. In the absence of such verification, it would be in order for the payee/bearer to provide his identity.

SBI to shut down 47% of associate banks' offices post-merger
State Bank of India (SBI), which will see five associate banks merge into it on April 1, has decided to shut down almost half the offices of these banks, including the head offices of three of them. This process will start from April 24.
 
"Out of the five head offices of the associate banks, we will retain only two. Three head offices of the associate banks will be unbound along with 27 zonal offices, 81 regional offices and 11 network offices of the associate banks," SBI Managing Director Dinesh Kumar Khara told IANS in an interview.
 
"We will keep their structure in place till April 24 and, post that, we will start dismantling the associate banks' controlling offices, which includes head offices, regional offices, zonal offices and network offices," Khara said.
 
The five associate banks that will merge with SBI are: SBBJ (State Bank of Bikaner and Jaipur), SBM (State Bank of Mysore), SBT (State Bank of Travancore), SBP (State Bank of Patiala) and SBH (State Bank of Hyderabad).
SBI is India's largest bank with assets of Rs 30.72 lakh crore and figures at No. 64 in the global ranking of banks (as of December 2015; December 2016 ranking is still awaited). Post-merger, with assets of approximately Rs 40 lakh crore, it will be among the top 50 banks in the world. SBI Chief Economist Soumya Kanti Ghosh told IANS that, post-merger, the bank will be at No. 45.
 
The shur-down move is to avoid overlapping offices in the same area and "we intend to remove any kind of duplicacy in the controlling structure", Khara said.
 
The five associate banks will cease to exist as legal entities and become a part of SBI from April 1, but the various merger processes will start only after April 24, once the balance sheets of the five entities are audited and added.
 
"We will have to get the balance sheets of the associate banks audited a day prior to the merger, that is, on March 31. The balance sheets of the banks will be drawn up and added; it takes 15-20 days. Soon after the audit is done, the branches will be completely merged with SBI," Khara told IANS.
 
There are currently 550 SBI offices while its associate banks have 259. The target for the number of controlling offices after the merger is 687 -- a reduction of 122 offices.
 
Employees directly affected by these shutdowns -- estimated at 1,107 -- will be redeployed, mostly in customer-interface operations, Khara said.
 
"The net result is that people in controlling functions will be available for deployment on the ground for improving reach to the consumer," he said.
 
"There are about 5-7 people in every regional office and 20-odd people in each zonal office. One regional office controls 30-40 branches, while 4-5 regional offices are controlled by one zonal office," he told IANS.
 
The associate banks have also offered a Voluntary Retirement Scheme (VRS) to employees who do not wish to relocate. "VRS is only an option, else they will be relocated. They will have a different role," he said.
 
Along with the winding-up of these offices, a number of merger processes will come into effect simultaneously, including the data merger of the five entities.
 
"Data merger will also start from April 24 and we will finish it by May end. That is the plan of action," he said, adding that the bank had given itself six months to complete all merger-related processes.
 
"I would rather say that within a quarter all the things should be in order. Ideally, we would like to have it in one quarter, but it will not spill over beyond the second quarter," Khara said.
 
SBI says the merger will be done seamlessly as it has the experience of two earlier mergers. State Bank of Indore was merged with SBI in 2010, while State Bank of Saurashtra was merged in 2008.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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COMMENTS

B. Yerram Raju

2 years ago

Last 15 days all the top management of both the Associates and SBI are busy with meetings and meetings sorting out many, many issues and hopefully they will keep the customer in focus who for most part is forgotten by the latter save exceptions.

B. Yerram Raju

2 years ago

Consolidation needs this action. But it is necessary to inform through all modes of publicity and advise all the customers - those with and without mobile phones - through written advice by the Bank branch concerned at least fifteen days ahead notifying the exact date and the branch to which the account gets migrated. On top of this, all those customers who have cheque bearing accounts - either current or savings bank shall be given new cheque books with the branch credentials to which the accounts migrate. Since the staff would be new to customers and so are the customers new to the bank staff, customers' meets on every second and fourth Saturday at mutually convenient time as these happen to be scheduled holidays for the bank. All the credit limits on transfer naturally require fresh documentation unless the bank gives blanket validity for all the documents till their current expiry period irrespective of the status of the account. All the Associate Banks and the SBI NPA accounts should get a breather as the latter will be unable to cope with the linking new officers with the existing accounts of Associate Banks. All the AB-clients (borrowers) should also be educated on the new policies and rigour of SBI handling their accounts. All the Safe Deposit Locker holders of the transferer branch hopefully retain their old locker numbers. It is a matter for detail as to how the joint custodian operating the locker when changed would take over the AB-Lockers on Board. Merger is merger of human assets of banks with different culture although the latter are trained into the SBI systems only. All complaints shall be dealt with expeditiously by properly acknowledging them. I am sure Bank is taking due care of these aspects lest there will be a turmoil and the way the merger is handled decides the future of the Bank in terms of the trust of the customers and clients.

Gurudutt Mundkur

2 years ago

Good planning. One would believe all the Unions are on board.

Lakshminath Mocherla

2 years ago

Though Ratan may claim is a gemtleman he has proved otherwise by his actions from time to time

Government swaps MDs of Indian Bank and IDBI Bank
The central government has swapped places of the head honchos of the Indian Bank and the IDBI Bank, the Indian Bank said on Monday.
 
In a regulatory filing, the Indian Bank informed the BSE that the central government in a notification on March 18, 2017, appointed Kishor Piraji Kharat, Managing Director (MD) and Chief Executive Officer (CEO) of the IDBI Bank as the MD and CEO of the Indian Bank for the remaining period of his current tenure or until further orders, whichever is earlier.
 
Similarly, the central government appointed the present MD and CEO of the Indian Bank, Mahesh Kumar Jain, as the MD & CEO of the IDBI Bank.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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