Naavi.org

Yet another case of Banking fraud involving loss of Rs 19 lakhs to a retired IIT professor has been reported by DNA.

See report

This is a typical phishing fraud arising out of failure of security in the Banking system. It is a clear reflection of the failure of RBI to maintain a secure Banking environment in India and the Governor of RBI is answerable to the public for such lapses.

Mr Raghuram Rajan who has recently taken over as the Governor of RBI is now in the process of issuing new Banking licenses and one of the criteria we have suggested is a mandatory Cyber Crime Insurance for all Banks (or atleast for the new licensees) so that Banking customers are not exposed to risks arising out of the greed of Bankers to use insecure technology for commercial profits.

Will Mr Raghuram Rajan take note of the frequent incidents of phishing frauds that are arising in banks and how Banks are bullying the customers to bear the loss though the incidents clearly reflect that Banks have not been compliant with either the law of the land or the regulations of RBI itself?

Naavi.org has been in the forefront of fighting for the cause of victims of  Phishing frauds in Indian Banking. Starting with the case of S.Umashankar Vs ICICI Bank, Naavi has been carrying the fight at various forums.

However, unscrupulous Banks are frustrating the efforts by playing with corrupt systems. The Cyber Appellate Tribunal (CAT) where several appeals are pending has been kept closed for last two years and this has effectively shut off all cases pending with adjudication officers against ICICI Bank, Punjab National Bank, State Bank of India, Axis Bank etc from further judicial scrutiny.

The Ministry of Information Technology is pressing with the Chief Justice of India to get through its recommended person for the post of Chair person of CAT which the Chief Justice has apparently not agreed to. But the ministry prefers to keep the Court closed rather than suggesting an alternate name.

Axis Bank has used the Karnataka High Court and manipulated a decision to shut off the Karnataka Adjudicator himself from entertaining any further cases of this nature.

In the absence of an initiative from RBI, Indian Banking customers will continue to suffer from the insecure technology banking platforms used by the Banks. It is therefore essential for RBI to issue a diktat to all Banks that in such cases money should be immediately reimbursed as recommended by the Damodaran Committee on Customer Services and the onus of collecting the money from the fraudsters should be borne by the Banks.

Naavi.org requests  Mr Raghuram Rajan to respond to this demand in the  interest of protecting the Indian Banking system.

Naavi

After RBI received 26 applications for Bank licenses, discussions have been going on on whether it is desirable to issue a large number of licenses or restrict it to a few. Many corporates who perhaps were the favourites of the Ministry of Finance were considered incapable of meeting the Financial Inclusion criteria which RBI was considering as the ey.

Also the presence of share brokers, gold loan companies, exchange brokers,real estate agents etc in the license aspirant’s list made the whole issue very murky.

Even the public sector companies were not considered capable of running Banks.

It was therefore difficult for RBI to seriously consider more than 6-8 applications even for preliminary screening.

It now appears that some formula has been found to accommodate more licenses by introducing a concept of “Differentiated Licensing” where some of the essential obligations such as priority sector lending etc would not be imposed on all the licensees.

It is still too early how the existing licensees would react to this differentiated licensing since it may saddle them with the unremunerative part of banking business while the new Banks will walk away with the cream of the business.

There is no doubt that vested interests may be active to get the licensing norms diluted. However if the licensing norms now considered are significantly different from the basis on which the licenses were called for, there could be a controversy like the 2G scam where Supreme Court may be moved to cancel the licenses issued as discriminatory against those who stayed away from applying based on the norms announced at the time of calling for applications.

The new RBI Governor now has a difficult task of remaining fair under political influences. Otherwise we may see a classic clash of RBI the regulator and the Supreme Court in the days to come while the politicians would be laughing all the way to their Swiss Banks.

Naavi

Related Article in ET

It is reported that RBI has zeroed in on a panel of 5 eminent members to screen the Banking license applications and provide necessary guidance to the RBI Governor for suitable decision.

Though not confirmed, it is expected that the members chosen for the panel are, Sebi Chairman U K Sinha, insurance regulator Irda Chairman T S Vijayan, pension regulator PFRDA Chairman Yogesh Agarwal, Financial Services Secretary Rajiv Takru and financial sector expert Y H Malegam.

(Refer report in BT)

In the last few months there has been some discordant notes struck between the RBI Governor and the Finance Minister. While the Finance Minister stated that there could be no limit to the number of applications that may finally be approved, the news was that RBI Governor had indicated that it would like to limit the number of licenses to 4 or 6. Also with the department of Post itself being an applicant and some of the RBI Directors being involved as promoters of some of the applicant groups, there are serious conflicts of interest that may arise in the context of granting of licences. Given the reputation of the current Government at the center, these conflicts would immediately translate into potential corruption possibilities or at least allegations.

It is therefore necessary for RBI as well as the expert group to make public the considerations adopted for the grant of licenses by placing the recommendation on each of the applicants before the public.

Naavi