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RBI is recommending unreasonable and Usurious charges for customers

Posted on February 11, 2013 by Vijayashankar Na

I draw the attention of the Governor of RBI to the latest discussion paper released by RBI for disincentivising the use of cheques.

If we go through some of the suggestions it appears that RBI has simply gone crazy. It is planning to misuse its respect and statutory powers to regulate the Banks to swindle the customers.

The suggestions in the discussion paper seems to have been issued either by a commercial bank or under the influence of a commercial bank.

The discussion paper for example suggests “Corporates should be asked to charge Rs 25 per instrument when they issue dividend warrants. It then goes on to suggest that collecting bankers should also charge for the collection”.

It appears that RBI has forgotten its objectives. It was considered the custodian of the Usurious Act to prevent charging of unfair interest to citizens. Now RBI itself has turned out to be crazily usurious.

I request the Supreme Court to take notice of this development and ensure that Bank customers of India are protected from the mindless suggestions in the discussion paper.

A copy of the discussion paper is available here

Naavi

Posted in Bank, Cyber Crime, ITA 2008 | Leave a comment

RBI out to openly violate laws of banking

Posted on February 11, 2013 by Vijayashankar Na

Section 5(b) of the Banking regulation act of India defines “Banking” as follows:

“banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise;

It is inherent in the definition that ability for “withdrawal by means of cheques” is an integral part of the definition. If this is not there, a business cannot be called “Banking business”. If any Bank therefore takes a principled stand that it does not want its customers to use cheques then it means that it is withdrawing from Banking business.

The license granted to such a Bank should therefore be considered as invalid.

Now RBI which is the licensing authority and the Banking regulator in India is itself taking a principled stand that Banks should stop allowing withdrawal of funds by cheques and is not indicating that the banking license would be cancelled.

This policy is contained in the “Discussion paper on disncentivisation in the use of cheques” released by RBI in which several suggestions are being made on how to disincentivise the use of cheques.

The discussion paper is akin to a paper on “How to create a Bomb and destroy India” issued by the Parliament itself.

RBI has no legal right to talk of any plan to “Disincentivise” use of cheques since this hits at the root of the Banking definition.

I demand that RBI should immediately withdraw the discussion paper and stop talking of “Disincentivisation of Cheque” any time in the future.

I request the Finance Minister to take suitable action to ensure that the suggestions are immediately withdrawn.

Naavi

Posted in Bank, Cyber Crime, ITA 2008 | Leave a comment

Phishing Frauds and Customer Liability

Posted on February 11, 2013 by Vijayashankar Na

Here is an interesting paper about how in US and EU, losses arising out of password thefts such as Phishing are not borne by the customers. RBI needs to take special note of this.

In particular I would like to draw attention to the following part of the paper.

QUOTE:

“In the US, Regulation E of the Federal Reserve limits consumer liability, in the event of fraud, to $50 (this is separate from the $50 limit for credit-card fraud, Regulation CC) and covers any electronic transfer that is initiated through an electronic terminal, telephone, computer or magnetic tape.”

In the US banks, brokerages, and credit unions are governed by this regulation and most go beyond it and offer a zero liability policy to consumers. Bank of America,for example,guarantees zero liability for any unauthorized activity originating from Online Banking or Bill Pay.” Wells Fargo says “We guarantee that you will be covered for 100 percent of funds removed from your Wells Fargo accounts in the unlikely event that someone you haven’t authorized removes those funds through our Online Services.” Fidelity “will reimburse your Fidelityaccount for any losses due to unauthorized activity” and “under HSBC’s $0 Liability, Online Guarantee, you’re covered 100% and liable for $0.”

Even non-traditional financial institutions offer this guarantee. For example in its Dec. 2009 10-K filing eBay states: “PayPal currently voluntarily reimburses consumers for all financial losses from transactions not authorized by the consumer, not just losses above $50.”

Thus, in the US, individual consumers are largely insulated from the direct financial consequences of credential theft” .

UNQUOTE

It is time RBI takes note of these and introduces similar policies in India also.

Naavi

Posted in Bank, Cyber Crime, Cyber Law, Information Assurance | Leave a comment

Internet Censorship-Case In Kerala posted for hearing

Posted on February 11, 2013 by Vijayashankar Na

The public interest litigation on Internet censorship filed in Kerala High court by an advocate Shojan Jacob is expected to be heard in the Keral High Court shortly. The petition which has highlighted the Section 79 rules under which arbitrary take down notices were being issued by private citizens and honoured by intermediaries also attracted the attention of the music industry which has impleded itself into the suit. details

Naavi

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

Usage of Cheques are being disincentivised

Posted on February 11, 2013 by Vijayashankar Na

Reserve Bank of India has released a discussion paper on a plan to disincentivise usage of cheques. Public have been asked to send their comments before February 28, 2012.

Disincentivisation of cheques automatically means greater push to the electronic banking along with the attendant risks.

It is our observation that the risks in Electronic Banking in India have not so far been adequately addressed by Banks and even the efforts of RBI in this regard have failed to yield results.

The Damodaran Committee report has not been notified and the GGWG report is yet to be fully implemented by the Banks.

We therefore feel that the time is not ripe to push Indian Bank customers towards a forced adoption of E Banking. This may lead to higher risks in Banking and the responsibility for further endangering the Indian Banking system will be on RBI.

Public comments for the discussion paper are to be submitted before February 28, 2013.

Naavi.org will be submitting its own response separately.

We urge public to also submit their response on whether the use of cheques need to be disincentivised by positive action or be left to market forces.

Copy of the discussion paper is available here

Comments may be emailed here: chequeusage@rbi.org.in

Naavi

Posted in Bank, Cyber Crime | Leave a comment