Dear RBI Governor, Can you do what you are suggesting others?

Posted on February 18, 2013 by Vijayashankar Na

I would like to draw the attention of RBI to the following paragraph in the discussion paper on Disincentivisation of Cheques issued by them.

“companies, schools and educational institutions, etc which receive payment and (should) provide an immediate documentary evidence to the payer in the form of printable receipts “

I would like RBI to first introduce a printable acknowledgement for any complaints filed with RBI through their website under the “Contact us” link. Presently we only get a note on the web “Mail sent”. This is insufficient. RBI should send an acknowledgement through email along with a copy of the message posted with the digital signature of a responsible officer of RBI.

Will the Governor and ED of RBI make suitable arrangements for such an acknowledgement say by tomorrow?

Naavi

 

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Dear Senior Citizens, You are unwelcome at Banks..implies RBI

Posted on February 18, 2013 by Vijayashankar Na

The RBI discussion paper on “Disincentivisation of issuance and use of cheques”  wants to impose penalties for using cheques in banking transactions as also for cash withdrawals and deposits. Instead it urges people to shift to Internet banking and ATMs.

As an ex-banker I am aware that many senior citizens take pride in visiting banks and doing their transactions in person. Some times they write a cheque and send it with somebody to draw money. Now as per the RBI’s intentions, senior citizens will not be welcome at the branches. If they withdraw or deposit cash, they may have to be prepared to pay charges. If they take a cheque book, issue a cheque or gve a cheque for collection, they need to pay charges for each such transaction.

If this means that the Senior Citizens need to change their banking habits, RBI has a convenient suggestion. Change over to Internet banking and use ATMs. If you want to pay your utility bills, use NEFT. Where you want to issue cheques, send it through Internet Banking.

Is this a practical suggestion for Senior Citizens?

I request associations of Senior Citizens to ponder over this suggestion of RBI and send their responses to RBI. Since the discussion paper is available only on the Internet and response can be sent only through e-mail, if you are not on the Internet bandwagon now, then you may not know that such a discussion paper actually exists. In fact those who are likely to be adversely affected by the RBI’s proposed changes may not even be reading this website and this message.

I therefore request all of you who are reading this message reach out to Non Netizens you know of and inform them of the impending danger to their financial life.

-Tell them that E-Banking in India is a risky affair where every year more than Rs 8000 crores are lost due to cyber frauds.
-Tell them that Banks in conspiracy with RBI are trying to introduce E Banking and simultaneously trying to shift cyber fraud liabilities to the customers because laws of banking in the cheque environment are too well established to be manipulated where as laws of E Banking is considered amenable for manipulation because there is still “lawlessness by administrative and judicial inaction” in the E Banking arena.
-Tell them to go their banks and demand a copy of the “Discussion Paper on Disincentivisation of issuance and usage of cheques” issued by RBI on 31st January 2013 and on which you can submit your views before 28th February 2013.
-Talk to your friends and take a collective action
-Take a class on Internet, Internet Banking, Cyber Crimes and Cyber Security to protect your hard earned savings in the Bank
-Tell them to address a letter to Governor, Reserve Bank of India, D.N.Road, Mumbai 400001 and inform

” We strongly oppose any move of RBI to disincentivise the issue and use of cheques and limit the number of cash transactions as proposed in the discussion paper issued on January 31, 2013. We want a commitment from RBI that there will be no tampering with the basic legal structure of banking in India to reduce the protection available to Bank customers in the form of frauds in the use of E Banking. We want immediate implementation of all recommendations made by the Damodaran Committee on Customer Service with immediate effect”

Naavi

Posted in Bank, Cyber Crime, Cyber Law, RBI | 2 Comments

Bandit Veerappan and his Wife’s claims of Copyright

Posted on February 17, 2013 by Vijayashankar Na

Recently a film has been released in Kannada called “Attahasa” which documents the story of Veerappan a notorious bandit who worked as a sandalwood and ivory smuggler in the forests in Karnataka,TN and Kerala. He was known for many notorious and brutal killings of Police officers and suspected informers. People in Karnataka will never forget the fact that he finally kidnapped Dr Rajkumar a matinee idol of Karnataka one of the most respected figures in karnataka.

Coincidentally four persons of the Veerappan Gang are now facing death sentence (Veerappan himself was killed in an encounter) and are now on the verge of execution with the rejection of their mercy petition by the President. In the light of the impending execution some supporters of the bandit are raising objections to the execution. In connection with this yesterday there was a heated debate in one of the Kannada TV channels where Mrs Muttulakshmi the wife of the bandit particiapted. She had a view that she had a “Copyright” on any film that is produced on Veerappan and the film producer had failed to get her permission to produce the film.

In this connection I have a serious doubt on how “Copyright” can be claimed by Veerappan’s wife for the story that involves Veerappan and his criminal deeds which are a representation of actual facts. It is not an artistic or literary creation of either Muttulakhsmi or even Veerappan himself. At best Muttulakshmi may have an objection that the depiction of Veerappan in the film is “Defamatory”.

I request other legal experts to comment on this academic issue.

Naavi

Posted in ITA 2008, Uncategorized | Leave a comment

RBI Move will encourage Private Cash Management Services

Posted on February 17, 2013 by Vijayashankar Na

The ill advised and illegal move of RBI to “Disincentivise usage of Cheques” through policy measures of penalizing cheque issuers and cheque beneficiaries is likely to have a serious negative impact on the economy with a significant increase of cash in private hands.

The apprehension that penalizing Cheque usage may lead to slippage of the economy into more cash usage has been recognized by the RBI but is being wished away as an issue that can be addressed with further penalization of cash transactions. The discussion paper suggests charging for Cash withdrawals and Cash deposits may be for transactions beyond a minimum number or value.

Penalizing an alternate that a consumer may use with further penalties is a “Negative Approach” to management and is likely to only trigger an “Emotional Disconnect” between the consumer and the service provider. We see this in the Income Tax arena where no IT payer is friendly with the IT collector. He sees the IT system as an unwelcome robber of legitimate revenue earned by him. This feeling has been reinforced over a period of time with every genuine tax management effort of a citizen being penalized with further provisions while the money collected is visibly used for the benefit of corrupt politicians in the Government. If Banks slip into this mode of penalizing every alternate measure adopted by the customer to avoid charges on cheques, then we will gradually see a build up of anti-bank sentiments. While RBI allows usurious charges to be made on say credit card borrowings both in terms of interest at the rate of over 36% p.a. and late payment fee of over 1000% p.a, pre-closure charges etc., if Banks start charging for switching over from cheque system to cash since they consider it more convenient, we will see bank customers trying to build some alternate methods of cash management to avoid the Banking system itself.  . RBI will then have to keep a separate division to check the violation of banking laws by citizens and start prosecuting such persons all over the country. Like IT department running a large enforcement wing, RBI will also need to have an enforcement wing for the purpose with the attendant costs.

In the meantime the private sector will be finding its own Cash Management syndicates where cash will be collected from the doorsteps of a business each evening and managed for the benefit of the customer. Members of a closed system may even find ways of inter account transfer and we will soon have a local money exchange service which may provide door delivery of cash withdrawals also. “Door to Door Cash Service” will therefore spring up initially in small communities and later as networks. Money will move out of the Bank system and remain in this alternate system. As the volume grows RBI needs to step in to plug this as a “loophole” and take up enforcement of its ill advised policies. If Desk to Desk couriers can survive the competition of the mammoth Postal service, it is not unthinkable for the Door to Door cash managers to carve out a profitable business model. Afterall the system is already in place in the Havala market defeating the Exchange contro regulations which is basically illegal. On the other hand the local cash exchange may be more legal until such time that laws are changed to make them illegal.

I hope RBI will realize its folly and withdraw the discussion paper and the suggestions contained there in at the earliest.

You can read the discussion paper and Naavi’s response here:

Naavi

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Why Cheque System is also important for Netizens

Posted on February 16, 2013 by Vijayashankar Na

Naavi.org has been in the forefront of discussions on E Banking security and how the bank customer needs to be protected from liabilities arising out of E Banking risks. At the same time we have also been opposing RBI’s discussion paper on Disincentivising cheque usage. At first glance it may appear that Cheques are a concern for the physical banking domain and Netizens need not show undue concern on the same. Many of the readers may also feel the same since like the undersigned they are also using E Banking and they may prefer E Banking to Cheque or Cash Banking anyway.

However the issue on hand is not just whether Cheques are important for people like me or not since we may be already well into the Cyber world. The issue is about preserving the basic structure of the Banking business. E Banking as we know in India is “Banking” through “E Channels”. It is not a different type of Banking. Way back in 2000 RBI gave up the idea of developing a “Virtual Banking network” independent of the current banking system. In fact this was one of the suggestions that the undersigned was speaking about some time around 1998-2000. The idea being pursued then was that Banks should treat the Internet Bank site as a “Virtual Banking branch” and open accounts separately for people who wanted to operate on the Internet maintaining their existing accounts as they do now with multiple branches. This would have enabled Internet banking risks to be contained within one account of the customer where he could keep minimum balance as he may require commensurate with his ability to absorb E Banking risks.

However Bankers in India opted to convert the existing accounts as E Banking accounts and linked the Internet directly to the existing account so that E Banking risks impacted the entire Banking relationship of a person. It is therefore seen today that when a customer’s SB account is compromised on the net, by virtue of its linkage his assets in the overdraft account secured by shares or stocks or the fixed deposits also get drawn out. Overinight we have seen people losing their life savings. This happens not only for people who may be not Internet aware but also to software professionals, Ex Bankers etc. The reason is that the world of malware is so well developed that even the normally prudent E Banking aware person may fall into a trap through a virus that enters his system through completely unrelated spam mail. This situation will continue and all of us who are happy with and use E Banking alternative constantly live under this risk.

What RBI is now proposing to do is to make E Banking a monopoly and force every person to use only E Banking. If and when this happens, apart from the non Internet savvy persons who would be drawn into the risky domain of E Banking and suffer losses, the pressure on the Banks to improve security for E Banking will vanish since it becomes a TINA (There is no alternative) option for customers. Whether I like it or not, whether I think it is risky or not, I will have no alternative.

Today I can tell my Bank that I am not using your ATM or Internet Banking because I consider that you have not adequately safeguarded it. This option will be lost.

Second and most important aspect is Cheque based Banking has centuries of history and a well developed Banking Law and Practice. We know what is the Banker Customer relationship, what are the rights and liabilities of the the drawer ordrawee, endorser or endorsee, holder or holder in due course etc. We know what is the liability of the customer on a forged cheque, a cheque which is materially altered, a cheque which is presented beyond a reasonable time etc.

If we look at the E Banking scenario, RBI has clarified that E Banking is Banking only and all the legal aspects applicable to physical banking also apply to E Banking. As a result the security responsibilities that apply to cheque based Banking also apply to E Banking with proper interpretation. It is for this reason that the undersigned argued with the Adjdudicator of Tamil Nadu in the S. Umashankar Vs ICICI Bank case that any banking instruction without a “Digital Signature” in the place of “Physical signature” is not binding. Simialrly the laws applicable to Forged cheques, provisions of NI Act on Paying and Collecting Banker’s responsibilities have all been extended to the case of Internet payment instructions.

Already current day Bankers have forgotten Banking law and conduct banking just as a computer application. Today’s bankers have little idea about endorsements and how to verify physical signatures. Once the use of cheques decline, Bankers who are aware of banking law and ability to check physical signatures will decline and this will adversely affect the whole banking system. At the same time when Cyber frauds occur and people like us draw attention to Banking principles, Bankers will be unable to appreciate the law and tend to fight all disputes in courts of law where they have the advantage of time and money. A Bank customer who has already lost money in a fraud is unable to fight for years in a Court for his rights where as for the Bank it is not difficult at all. We are already seeing this tendency in about a dozen Phishing cases that are lying with several Adjudicators and the Cyber Appellate Tribunal.

I therefore consider that existence of physical banking on a sound footing is essential for the increased attention of Bankers on E Banking security. I therefore urge Netizens for whom E Banking is always preferable to physical banking will also support this initiative where Cheques continue to be used. Additionally, If cheque usage has to shrink without “disincentivisation”, the Banks will have to provide more concessions to E Banking customers. Hence as long as cheques thrive, E Banking customers can expect reasonable charges. Once E Banking becomes the only option, Banks will certainly start increasing the charges on E Banking since there will be no option for customers to switch.

I request Netizens therefore to also join our protest against “Dsincentivisation” of the usage of cheques by sending their opposition to the suggestions made on the discussion paper to RBI.

You can read the discussion paper and Naavi’s response here:

Naavi

Posted in Bank, Cyber Crime, ITA 2008, Netizen's Forum, RBI | Leave a comment

RBI is impotent.

Posted on February 16, 2013 by Vijayashankar Na

The hard hitting articles on this website on E Banking insecurity and therefore an assertive opposition to the current RBI move to hard push customers from cheque disincentivsation measures towards E Banking may annoy some of the technology followers both within RBI and outside. They may think that we are only trying to object what should be a normal technology development.

But it must be remembered that in advanced countries such as US technology is being encouraged along with security initiatives on the part of the Banks. It is only in India that this is not happenning in the right measures. Naavi.org has time and again acknowledged that GGWG recommendations as well as the Damodaran Committee recommendations are good and show case the intentions of RBI to protect customer’s interests. But what is lacking with RBI is the ability to implement its own recommendations against the objections from the commercial world.

For this impotence, RBI needs to be criticised.

I am enclosing a white paper on E Banking security which documents some of the threats that Bank customers face today in the Internet Banking scenario. There are more threats in the ATM transactions that this white paper does not cover. The FFIEC has also issued its own authentication guidelines for Banks to follow. The regulation E also limits customer’s liability for Cyber Frauds to US $50/-

In India we have the ITA 2008 which recommends Digital Signatures. We have the law as well as RBI guideline that Bank alone is liable for Cyber frauds. But yet there are backdoor attempts to give a misleading picture to the public that cyber fraud liability is that of the customer. RBI places reliance on ISO 27001 audit certificates as if it is a panacea for all E Banking security issues. This shows gross ignorance of the Cyber Security scenario and needs to be corrected quickly.

We need RBI to ensure that its own guidelines of the past are promptly implemented and if not it should take strict disciplinary action against the Chair persons of the concerned banks including their removal from the responsibility.

Will they respond ?

White paper on E Banking security

 FFIEC authentication guidelines

Naavi

Posted in Cyber Law, ITA 2008, RBI | Leave a comment