Voila! Customers could withdraw money from zero balance Jan Dhan accounts!
In what it could be a technical lapse or sheer good luck, several Jan Dhan account holders from Beed district in Maharashtra have been able to withdraw money using Aadhaar authentication from zero balance accounts, reports Marathi daily Loksatta. Since these accounts had no money at all (zero balance), this withdrawal could not even be passed off as a part of the Rs5,000 overdraft facility promised on the Jan Dhan accounts, nor do they meet the overdraft criteria. 
 
According to the report, two banks that saw such withdrawals --Maharashtra Gramin (MG) Bank and State Bank of India (SBI) -- have stopped all transactions being carried out from their customer service centres through Aadhaar authentication. It is not quite clear how the withdrawals started or who figured out that the banks were dispensing money even without a balance in the account. But it is reported that such withdrawals occurred on Tuesday and Wednesday from both banks. Very soon, hundreds of customers from Gevrai taluka started approaching the service centres to withdraw money, Bank officials became suspicious. Upon enquiry, they found that someone had spread a rumour that the government had deposited money in Jan Dhan accounts, the report from Loksatta says.
 
According to the report, both the banks are clueless about how much money has been withdrawn in the past two days and have started enquiry into this incident.
 
MG Bank has around two lakh customers. The Bank permits withdrawal of cash from accounts through Aadhaar from about 20 centres. The bank permits withdrawal of Rs10,000 at a time, and a total of Rs20,000 in a day through these customer service centres. An IT company called Vakrangi Software (which has a patchy track-record) operates these Centres, which are controlled from its Mumbai office, the report added.
 
After every transactions, customers receive an SMS alert on their registered mobile. However, since the customers, who withdrew money in these cases, had a zero balance, no alerts were generated.
 
Dr Anupam Saraph, Professor, Future Designer, former governance and IT advisor to Goa's former Chief Minister Manohar Parrikar, feels that this (incident) is adequate proof of how Aadhaar linkage is also destabilising our banking system besides jeopardising national security as has been highlighted to the Reserve Bank of India (RBI) and the government repeatedly since 2013. "The RBI has also failed its responsibility to de license Aadhaar Based Payment Systems following the orders from the Supreme Court. Clearly, the RBI cannot distance itself from its failure of responsibility that has resulted in this fraud. The government should recognise this as a national emergency and halt the Aadhaar monster and Aadhaar based direct benefit transfer (DBT). The RBI must stop all Aadhaar based know-your-customer (KYC) and banking immediately," he added.  
 
Earlier this month, Indian Express had reported how several officials were quietly depositing Re1 from their pockets to erase zero-balance accounts — and dress up the data of Jan Dhan accounts.
 
As many as 20 branch managers and officials told The Indian Express, on the condition that they not be identified, that there is "pressure" on them to show that zero-balance accounts are falling in number. "There was a perception that so many zero-balance accounts means no one is using them, so there was pressure on us to change that," one official was quoted by the newspaper.
 
The newspaper also filed an application under the Right to Information (RTI) Act. As per the information it received, 18 banks from the public sector and their 16 regional rural subsidiaries held 1.05 crore Jan Dhan accounts with deposits of Re1.
 
Earlier in May, SS Mundra, Deputy Governor of RBI, while raising concerns that Jan Dhan accounts can be used by money mules, have warned that such accounts are vulnerable to frauds and asked banks to be on vigil. He said third parties could be used to launder the proceeds of fraud schemes (such as phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting them as 'money mules'. 
 
The RBI Deputy Governor also highlighted a case where an idle account was used for receiving and transferring large funds without the knowledge of the accounts holder. "It was an account of a daily labourer in Punjab and the account was opened as a basic one where there is limitation on number of transactions. This amount of transaction was of Rs1 crore," he said.
 
The case became known when the income tax authority served the notice to the account holder. "This episode highlights the failure of the banks system and processes for monitoring of newly opened accounts," Mundra had said.
 
As per Basic Statistical Return (BSR) statistics for 2014-15 released by the RBI, the Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts swelled to 14.4 crore in 2015 constituting 17.4% increase in the group. Admitting that several accounts could be with zero-balance, the banks were supposed to open overdraft accounts after six months of operations. Data reveals that banks opened such accounts only in respect of 0.65% of the total number of accounts as at the end of December 2015.
 
While the bank officials were busy reducing zero balance accounts from their records, rural folks hit back by actually withdrawing money from such accounts. Simply amazing.
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COMMENTS

Deepak Narain

3 years ago

Politicians do things for easy publicity at public cost. These schemes do not materialise where most needed. Lakhs of people died in accidents in 2015. How many of affected families were given the insurance amount of Rs one lakh under Jan-Dhan scheme?

Mathew Thomas

3 years ago

"Oh! This is just a one-off case. We will fix these initial glitches", would be the response of UIDAI and of course our government. And rightly so! After all, this is the "inclusive" agenda of the current dispensation. In my view, this is but the tip of the iceberg, bigger than the one that sunk the Titanic! If I remember right, the firm that manages the accounts and named here was an enrolling agency and was embroiled in some irregularities. Its agency was terminated, I believe.

Indian couple reach settlement with major Australian bank
One of Australia's biggest banks reached a settlement with an Indian couple on Thursday who sued the company for $1.9 billion.
 
Pankaj and Radhika Oswal alleged that Australia and New Zealand Banking Group (ANZ) short-changed them $580 million when selling the couple's majority stake in Burrup Fertilisers after the company went into receivership, Xinhua news agency reported.
 
ANZ said the terms of the settlement were confidential but the deal with the Oswals meant the bank would take a $110 million hit to its bottom line this year.
 
A spokesperson for the Oswals said the couple, who also settled a tax bill with the Australian Taxation Office (ATO) worth an estimated $76.4 million, would be leaving Australia.
 
"They're very satisfied with the settlement. They were very pleased to be able to put the facts before the court and they're pleased that it's over," the spokesman said in a statement on Thursday.
 
"They won't be staying in Australia. They are now planning their futures."
 
"The ($110 million) does not reflect the size of the settlement but the Oswals are bound by confidentiality to not disclose the details."
 
Shayne Elliott, CEO of ANZ, said that the settlement does not mean the bank has accepted guilt.
 
"ANZ does not accept many of the claims made in court and we completely reject the allegations made against our staff," Elliott said in a statement to shareholders.
 
"However, we believe the settlement is the right decision for shareholders bearing in mind the residual risks in a case of this size and complexity."
 
The Oswals' spokesman said it was "curious" that the bank would be willing to pay a significant amount of money to stop allegations that it claimed were untrue.
 
The Oswals were forced to abandon the construction of their Perth mega-mansion, dubbed "the Taj on the Swan" due to its position on the Swan River, in 2010.
 
A local council announced in September that the 6,600 sq.mt house, which the couple planned to spend $53 million to build, would be demolished and turned into road-building material.
 
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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Nearly half of Indian banks risk breaching capital triggers: Fitch Ratings
Nearly half of the Indian banks run the risk of breaching the capital triggers owing to the progressive increase in minimum capital needs under Basel III norms, said credit rating agency Fitch Ratings.
 
According to Fitch Ratings, the government-owned banks are more at risk due to their poor existing capital buffers and weak prospects for raising capital from the market.
 
Analysing 27 Indian banks with outstanding hybrid capital instruments, Fitch Ratings said at the end of June, the total capital adequacy ratio (CAR) for 11 banks was at or lower than the minimum of 11.5 per cent required by end-March 2019 (FYE19).
 
"Of these, six did not have enough capital to meet the minimum required by FYE17. The minimum total CAR is a prerequisite for payment of coupons on both legacy and Basel III perpetual debt capital instruments," it said.
 
According to the credit rating agency for Basel III perpetual instruments, coupon deferral is also linked to banks meeting both minimum regulatory common equity tier 1 (CET1) ratio and Tier 1 ratio. More than half of the banks currently have a CET1 ratio that is below the required eight per cent minimum that will be applied from FYE19.
 
Fitch Ratings estimates the Indian banks would need around $90 billion fresh capital by FYE19 to meet the Basel III standards, with the state banks accounting for about 80 per cent of the total.
 
The government has already earmarked Rs 700 billion ($10.4 billion) for capital injections into state banks through to FYE19 and in July, it announced that Rs.229 billion ($3.4 billion) was being frontloaded.
 
According to Fitch Ratings, capital injections may not be sufficient to address their ongoing capital needs to meet required provisions and to support balance sheet growth.
 
As it stands, state banks are heavily reliant on the government for new capital. Sharply deteriorating financial profiles have raised the standalone credit risks of state banks over the last year and equity valuations have suffered as a result. Most continue to trade at heavy discounts to their book value, which acts as a significant constraint on raising new core equity.
 
The State Bank of India's proposed $1 billion issuance of dollar-denominated Additional Tier 1 (AT1) instruments will be the first cross-border deal, and Fitch Ratings believes the issuance will serve as a pricing benchmark for other banks keen to access the dollar AT1 market.
 
The Reserve Bank of India's recent proposal to allow banks to issue "masala bonds" - rupee-denominated bonds issued in offshore capital markets - could also help widen the investor pool and ultimately deepen the market for AT1 bond issuance, it said.
 
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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