In your interest.
Online Personal Finance Magazine
No beating about the bush.
Despite directions from RBI, banks refuse to share details of the entity sending money through NEFT
The National Electronic Fund Transfer (NEFT), used by almost everyone to transfer money quickly, can also put the receiver in a difficult position. The main reason is, there are no details available about the remitter or sender and if the amount is large, then the recipient may end up facing Income Tax (I-T) Department queries. Remember what happened with Aishwarya Rai, when in 2006 she received a parcel containing 23,000 euros (around Rs14 lakh at that time) sent by an unknown person from the Netherlands?
Well, with banks hesitating in sharing details of the person or entity who is transferring money via NEFT, it may be you next time. Although the Reserve Bank of India (RBI) has directed banks to furnish appropriate details in passbook or account statement for credits sent and received by the customer through NEFT, all the recipient gets is just a name and amount. “A very generic mention as 'NEFT' or 'NECS' does not help customers in identifying the source of credits, particularly where multiple credits are afforded to their accounts through these products. The Core Banking Solutions (CBS) of banks should be enabled to capture complete information from the relevant fields in the messages, data files which can be displayed to customers when they access their accounts online or provided to them additionally when they approach the branch counters, help desks, call centres,” the RBI had said.
However, all the recipient gets to know is just a name. There are no details like sender’s PAN number, address and the cause/remark for the money transfer.
Often money launderers are found using bank accounts of low-income individuals for transferring money. In addition, due to the forceful implementation of the Jan Dhan Yojana, we have about 10 crore new bank accounts, out of which 73% do not have a single penny. But consider that tomorrow, if somebody uses these accounts to launder money, then without detailed information about the remitter, how is a poor Kalawati supposed to answer queries from the authorities, including but not limited to I-T department. In the absence of detailed information about the remitter, how will she explain the unaccounted money remitted into her account through NEFT?
Receiving funds from unknown remitters becomes an even bigger issue for non-governmental organisations (NGO), who need to give a receipt as well as I-T exemption certificate. If there is just a name of the remitter, how and where is an NGO, like Moneylife Foundation, supposed to send the receipt?
Another issue with NEFT fund transfer is the delay. According to RBI policy, banks need to afford credits to beneficiary accounts or return transactions (uncredited for whatever reason) to the originating / sponsor bank within the prescribed timeline. It also directed banks to move towards hourly settlement starting from 9am to 7pm on all week days and between 9am to 1pm on Saturdays. Yet, it appears that banks are still using the last part of the work-day or first hour of the next day for NEFT transactions.
Coming back to the Aishwarya Rai episode, the actor was grilled by the Customs official for two-and-a-half hours at the international airport as soon as she landed in Mumbai from Jodhpur. The parcel was allegedly sent by one Avineshwar from the Netherlands marked to the actress. It arrived at the Foreign Post Office in Mumbai during September 2006. Besides the currency, it also contained a top-brand shirt, a pair of binoculars, a DVD player and other electronic items. Following a notice, Aishwarya's father Krishnaraj Rai, on 15th November met Custom officials to clarify her position. However, the officials insisted to know details from Aishwarya, due to which the actor had to come to Mumbai to clarify her position. She was shooting for the movie 'Jodha Akbar' in Jodhpur at that time. After the enquiry, she was give a temporary clean chit by the Customs.
Therefore, it is high time the central bank issues another order mandating banks to share all details of the remitter who is sending money through NEFT or any other payment method to the recipient and actually penalises banks if there are persistent complaints about flouting the RBI’s order.
There is a growing sense of frustration among bank customers about the constant, stealthy increase in service charges. Strangely, RBI, the regulator is siding with the bank cartel. Will PM Modi and FM Jaitley pay any heed to helpless bank customers?
This weekend, Prime Minister Narendra Modi and Finance Minister Arun Jaitley along with Reserve Bank of India (RBI) Governor Dr Raghuram Rajan, will meet bankers in Pune at a two-day banker’s retreat. PM Modi is scheduled to interact with bankers on 3rd January. The Retreat would try to achieve a broad consensus on what has gone wrong and what should be done both by banks as well as by the government, among other issues. As usual, in such kinds of meetings, the customer or customer services side of the equation does not feature. It is important for PM Modi and FM Jaitley as well senior officials from Finance Ministry to understand and ask bankers present in the retreat, about the treatment meted out to customers and unfair charges levied by them for banking services. Banks are ripping off customers in a variety of ways: charges on automatic teller machine (ATM) transactions, higher debit charges, SMS alerts (that was a security feature initially), minimum balance requirements, ATM and debit card charges, cheque leaf charges, account closure charges, money transfer charges and so on.
However, so far the government has maintained a stoic silence. The regulator, Reserve Bank of India (RBI) has ignored all appeals and memoranda by consumer organisations, unions and non-governmental organisation (NGOs).
Finally, two lawyers have taken the lead in filing litigation — one in Madurai (Madras High Court bench in Madurai and another at Delhi. The High Courts have taken prima facie cognisance of the issue and issued notices to the RBI and the Indian Banks' Association (IBA). Meanwhile, activist Nutan Thakur and ML Sharma have moved the Allahabad High Court on sale of insurance products by Punjab National Bank. This is also an issue that Moneylife has taken up in the past.
The RBI has decided to back banks’ move to charge for ATM transactions beyond a threshold limit despite protests by consumer organisations and depositors. The RBI has ignored all our memorandums including the one sent jointly with trade unions and other consumer groups. Will Prime Minister Narendra Modi or Finance Minister Arun Jaitley ask bankers about this?
Even on the single point that was accepted out of Moneylife’s memorandum to the RBI, which was regarding the reporting system for non-working ATMs — the RBI has breezily entrusted it to the IBA, which will have minimal interest in setting up a system that will expose their own warts.
An official, writing on behalf of the Governor, said that RBI would ask IBA to “incorporate ways and means through which customers are enabled to report about ATMs which are not in working condition to the banks.”
Is RBI so naïve as to believe that banks do not know which of its ATMs are not functioning or have not bothered to load adequate cash? When the regulator supports a bank cartel by readily accepting their claims about transaction costs without exploring ways to reduce them, what option do depositors have?
First, the stricter limit on ATM transactions applies to six metros, when in fact, the higher number of transactions should lead to lower costs. Secondly, in-bank transactions, which are much more expensive are not being charged—unless RBI plans to permit those too in the near future.
Interestingly, ATM charges were a subject of hot debate at an Open House session by Moneylife Foundation on 22 November 2014, with its new trustees—TS Krishnamurthy (former chief election commissioner of India), Dr KC Chakrabarty (former deputy governor, RBI) and Siddharth Das, COO of Payment Systems at Flipkart.
Dr Chakrabarty, well known for his brutal outspokenness, had said, “I don’t agree with the institutional view of the RBI… on allowing banks to charge for withdrawals from their own banks.” He demolished the claim that customers must pay for services saying, “If banks want to move to a system of transaction fees to be paid by customers, then they must also be prepared to work at very low interest spread. They cannot pay 4% on savings accounts but charge 12% or more on advances and also charge customers for transactions.”
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 services that were free till now, like mobile text alerts and higher charges and increase in debit cards fees, has become a source of irritation and discouraged people from maintaining 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.
Moneylife Foundation had pointed out that there is no system in our country to report non-functioning and 'out of order’ ATMs that we as customers see almost every time we want to use it. This makes it necessary for people to hop around and use other bank's ATM that are working. Another crucial issue is the restriction on money withdrawal. If someone needs, let’s say Rs25,000 but the ATM has withdrawal limit of Rs10,000. In this case, the person would end up making all three permitted transactions in one go.
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.
Will PM Modi, who often talks about bringing 'achhe din' for common citizens rein in the financial regulator and the bank cartel from punishing own customers by levying variety of charges while enjoying one of the highest spreads on interest anywhere in the world?
You may also want to read…
Researchers feel that the banking industry may encourage employees to think that cheating is okay
When a banker you trust dupes you, he is called a ‘bankster’. Moneylife is not new to such bankers. We have come across several cases where consumers have been duped by bankers selling them third-party products. Bankers have become aggressive salesmen, selling insurance, and mutual...