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Why The Governor of RBI is guilty of this bloodbath?

[P.S: This article is in continuation of my previous series of articles starting with the article titled Indian Media is Insensitive..here where I had pointed out how increasingly E banking frauds are affecting the health of banking victims and why certain persons should be considered responsible for the bloodbath ].

In the previous articles we have stated how in India Banks are trusted by people to place their hard earned savings and how when this is robbed in an E Banking fraud, the victims get into medical problems and possible death, suicide etc. It is the objective of this series of articles to draw the attention of all those who are directly or indirectly responsible for this bloodbath and highlight their respective contributions to this sad state of affairs. In the earlier articles we have covered the role of Bank chairpersons and CISOs of Banks. In this article we highlight the role of RBI. So far my attempts to draw the attention of the Governor of RBI on this problem has failed. I hope that at least this article will probably open the eyes of the Governor.

Reserve Bank of India is by law the custodian of the interests of Bank customers in India. It is expected to regulate the Indian Banking system. We the customers of Banks consider that "Banking" as a service is "Acceptance of Deposits repayable on demand or otherwise". We know that the Banks lend our money and make profits. We also understand that "Profits" are essential for us to get a suitable return. We are however sad that our returns are is dwindling day by day while the cost of Bank services are always increasing. RBI once told that there is computerization in Banks to reduce the cost of Banking but we now know that Computerization has only increased the cost of Banking. Besides, Computerization has hit at the very root of Banking by eroding the safety of our funds through the various types of E Banking  frauds. The responsibility for introducing and encouraging the use of E banking lies with the RBI and hence the responsibility for the loss suffered by customers also lies with RBI.

To be fair to RBI, way back on June 14, 2001, RBI made it clear in their circular on Internet Banking that the losses arising out of E Banking frauds are the responsibility of Banks and they should take appropriate insurance. This was again reiterated when revised guidelines on E Banking security were issued on April 29, 2011 following the recommendations of the G. Gopalakrishna Working Group report (GGWG).

However, RBI has failed in ensuring that its own recommendations are followed by the Banks and here in lies the negligence, incompetence and liability of the Governor of RBI.

On 3rd August, 2011, the M. Damodaran Committee came with a report on customer service and made several recommendations that had a bearing on softening of the E Banking Fraud impact on the customers. However, RBI is yet to formulate its recommendations on the report because the IBA and the Banks are not in favour of the report. It is a shameful situation for the RBI to be in a position that it no longer has the authority to administer the Banks and the responsibility for the same should lie with the Governor of RBI.

RBI has set up a Banking Ombudsman scheme which should have helped at least in some cases of E banking frauds. But unfortunately the scheme has been diluted to the extent that it is unable to take any corrective action in case of E Banking frauds.

In recent days, Naavi has directly demanded RBI about the following.

1. Internet Banking license of Banks which have been proved to be negligent in E Banking administration must be withdrawn. A specific request in this regard was made in respect of ICICI Bank Tirunelveli branch and PNB, T Nagar, Chennai branch.

2. RBI should recognize that E Banking frauds in which fraud money has been credited to accounts in different banks are clearly money laundering transactions and indicate failure of KYC norms. RBI should therefore fine such Banks  at the rate of Rs 5 lakhs for each failure and create a "E Banking Fraud Guarantee Fund" to pay the victims without the need for any other formality.

3. RBI should designate the Internet Banking as it exists now as a "Non Banking Finance Activity" and take it out of the purview of Banking.

The requests have gone to the highest levels in RBI including the Governor. However there is no response on the same.

Naavi has also brought to the attention of RBI that there is a serious flaw in the Internet Banking security arising out of Man in the Browser attacks and RBI should take some corrective actions immediately to prevent the possibility of a Cyber Terrorist attack on Indian Banks.

However all these efforts have been met with a stoic silence from the authorities.

Under these circumstances, Dr D. Subba Rao, the Governor of Reserve Bank of India must be considered as having failed in his duty to protect the interests of the Customers of Indian Banks who are seeking a safe banking platform. The blood of the E Banking victims is therefore all over the hands of the Governor of RBI.

I am aware that my words are painful for some of the executives of RBI who are clearly on the side of the Customer and are trying to do their best to improve the situation. However they are unable to bring any improvements since they donot have the support from the top. Hence the responsibility for the proliferation of E Banking Frauds has to squarely rest on the Governor of RBI.

I wish some body files a PIL against the Governor of RBI and demands corrective action to restore security in the Indian Banking system.


(To be continued)

Previous articles:

 1. Indian Media is Insensitive..here

2. Blood of Bank fraud victims are on these hands...

3. Why CISO's of Banks will be guilty of murder


February 26, 2012