On January 2, 2013, Mr G.Padmanabhan, (GP) Executive Director of RBI gave a keynote address in Banker’s club Trivandrum where he has echoed some of the arguments used in the discussion paper on disincentivisation of cheques which was later released on January 31, 2013.
Mr GP has spoken about the “efficiency” of the electronic payment systems as compared to cheques but has failed to recognize that the definition of “Banking” is integrated with the use of cheques. If Cheques are being discouraged through a policy of RBI, it is against the charter of RBI. It is better if Mr GP considers the impact of the policy in the light of what Section 5(b) of the Banking Regulation Act states.
Mr GP has also failed to recognize the higher risks of E Banking, the emergence of global cyber crime syndicates, huge credit card cloning industry, Exclusive malwares that target POS systems and browser systems which make the system “Unsafe”.
Mr GP also talks of the UK Payment Council but is silent of the withdrawal of a similar move promoted by the Payment Council in UK. I would like to draw his attention to the words of Mr Mark Hoban, the Financial Secretary to the Treasury who said “cheques would not be scrapped until a suitable alternative is found” …“This is a victory for those who continue to rely on this trusted form of payment – including charities, the elderly and small businesses.It would have been irresponsible for banks to abolish the cheque before a credible and coherent alternative had been developed…..”“Banks must now stop discouraging customers from using cheques. I remain concerned that the Payments Council, an industry-dominated body with no proper accountability, holds the future of cheques in its hands.”
It appears that Mr GP was indulging in selective misinformation during this speech. This is not a one off mistake from Mr Padmanabhan as we can observe further.
He says “Even globally, it can be said that the need for and the discussion about consumer protection in electronic payments is a relatively new phenomenon as compared to cheques.” forgetting that the S.R. Mittal Group way back in June 2001 clearly stated that the rights of the consumer as it exists before the introduction of Internet Banking will continue. This was also endorsed by the G Gopalkrishna Working group on E Banking Security in 2011.
While speaking on the ATMs, Mr Padmanabhan has remained silent of Mr Damodaran Committee on Customer Service and its recommendations.
Mr GP has also made some uncharacteristic and irresponsible comments on the customer liability in electronic transactions. He has referred to the US Regulation E without mentioning unequivocally that the regulation places a ceiling on E Banking fraud liability on customers. He has however called for further discussions in a Round Table on this subject. If ever such a discussion takes place, we need to see if it would be a fair discussion or would be a manipulated discussion with select supporters of the RBI’s idea being drummed up.
After all we cannot miss the point that the Discussion paper on Disincentivising cheques was released only in the Internet so that only those who really have not much of a technical barrier in using E Banking will read and respond. This is like a “fixed” market survey. We are also aware that there is a strong lobbying force in RBI where committee compositions are determined by known loyalties and targeted outcomes. Some prominent Bankers are experts in getting into RBI committees and push their personal agenda in RBI’s policies. A similar attempt may be made even in the round table suggestion.
I therefore suggest that RBI should release the discussion paper to all Consumer organizations in India and invite at least 3 or 4 consumer organizations to the round table. The discussions should be held in multiple locations so that local consumer organizations could participate. Information Security experts who can point out the security holes in the current E Banking systems and exposing the flaws in the argument of “E-Banking being more efficient”. Media also should be invited for such a round table. Then we may have a reasonable discussion.
Naavi.org invites RBI to hold such a round table in Bangalore and invite some of the members of the Information Security team that Naavi.org can put together.
In conclusion one can say that Mr Padmanabhan’s speech is very disappointing as it indicates an anti consumer streak in the Executive Director. The current push to move the customers forcefully from paper and cash based Banking to Electronic transactions completely ignores the needs of the large section of population which is illiterate. It only seems to be agenda beneficial to the profiteering desire of Commercial Banks and the commercial interests of plastic card suppliers.
It is necessary for Mr Padmanabhan to clarify his position in the light of comments made on this site and in the note sent to RBI by the undersigned. I also note that his speech was prepared with the assistance of the following officers of RBI namely Smt C S Kar, Saswat Mahapatra, Shri G Mahalingam, S Ganeshkumar, A Madhavan and Smt Radha Somakumar who may also be the persons responsible for projecting Mr Padmanabhan as an anti customer executive.