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Finance Minister Arun Jaitley introduces Banking Regulation Bill
The Hindustan Times Published on July 25, 2017
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The Banking Regulation (Amendment) Bill will replace an Ordinance that enabled this earlier
New Delhi, July 24: Union finance minister Arun Jaitley on Monday introduced in the Lok Sabha a bill which allows the Centre to authorise the Reserve Bank of India (RBI) to direct banks to initiate recovery proceedings against loan defaulters.
The Banking Regulation (Amendment) Bill will replace an Ordinance that enabled this earlier. The recovery proceedings would be under the Insolvency and Bankruptcy Code, 2016, that provides for a time-bound process to resolve defaults.
Trinamool Congress member Saugata Roy opposed the introduction of the Bill. “It is a desperate step by a desperate government,” Roy said. “The same RBI is being authorised to regulate banks which has till date not been able to give (the total) amount of money deposited in banks after demonetisation,” Roy said.
Non-performing assets (NPAs) of banks have risen to over Rs 9 lakh crore and the RBI is now being given power to refer these cases to the Insolvency and Bankruptcy Board, he added.
He demanded the Bill to be sent to a parliamentary committee.
Jaitley responded that the objections raised by Roy had nothing to do with the introduction of the Bill. “The issues raised by him can be discussed when the Bill comes up for discussion,” the Minister said, after which it was introduced in the house.
Last month, the RBI identified 12 large loan defaulters who account for 25 per cent of the total NPAs, or bad loans, in the banking sector. Action has already begun under the Insolvency and Bankruptcy Code against some of these defaulters, including Essar Steel, Bhushan Steel and Bhushan Power and Steel.
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From E-Group, Banking-News
Insolvency not the best solution to alleviate NPA pain: HDFC Bank's Aditya Puri
The Economic Times Published on July 25, 2017
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Mumbai, July 24 (PTI): Veteran banker Aditya Puri today said initiating insolvency proceedings is not the "best solution" to fight the bad loan issue and advocated using the recently introduced law only in cases of wilful default.
"As far as going to insolvency courts is concerned, that's not the best solution. Ideally, we should be able to help him to breath, and only if he is a wilful defaulter we opt for insolvency court," Puri told the HDFC Bank's annual general meeting.
Puri, managing director of the leading private lender, said his bank has nothing to worry from the RBI-mandated resolution of 12 big defaulters under the Insolvency and Bankruptcy Code (IBC).
In an apparent reference to issues faced by bankers in making things work, including Essar Steel's petition, Puri said all new things have a "teething problems" and hoped everything moves in the "right direction".
Without naming Essar Steel, Puri said HDFC Bank had exposure to one of the 12 accounts which was part sold to asset reconstruction companies (ARCs) and the remaining part has been fully provided for as against the RBI mandate to set aside 50 per cent.
Later speaking to reporters, Puri said the IBC provisions should be used as the "last resort" and not as a "first thing".
"It is a good thing where a company cannot be turned around you should use insolvency, but that does not mean you take to court every poor fellow who has had an unfortunate circumstance or his business did not work or he needs minor care... you don't put everyone in the ICU and get a heart transplant."
Replying to a shareholder query on the sector witnessing maximum stress for the bank, Puri said agriculture is the one segment showing most stress because of demonetisation and farm loan waivers, but called it a temporary "blip".
"That stress in itself does not mean that we will move towards a bad loan scenario. This is a temporary blip. By and large, agriculturists are honest people and the money will come back to banks."
"At this point of time there is distress which has to be alleviated. Is there going to be some temporary impact on NPAs? Yes, I think the stressed assets will go up but will there be a major impact? No!," he said.
It can be noted that the lender's Rs 28,000-crore agri book was one of the prime reasons for a spurt in gross non performing assets ratio to 1.24 per cent as at the end of June.
Puri told shareholders that bad assets are bound to happen in the banking business and added that one to 2 per cent should be a tolerable number.
He said the advent of digital alternatives has made the bank revisit its bank strategy to fix opening 150 branches per year as the right idea.
The bank is also witnessing a downward shift in ATM transactions and is "strategically evaluating" options on what to do, he said. Puri said the inflation trajectory is trending down, hinting that this would be the best time to go for a rate cut by the Reserve Bank.
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From E-Group, Banking-News
See immense value in SBI Card Business: Dinesh Khara, MD, SBI
The CNBC-TV18 Published on July 24, 2017
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Mumbai, July 24: State Bank of India (SBI) and marquee private equity investor Carlyle Group will acquire GE Capital Group’s entire 26 percent stake in SBI Card. SBI Card is a joint-venture between SBI Cards and Payment Services and GE Capital Business Process Management Services, which issue credit cards and process card transactions. The deal that has been in the waiting for several months.
Dinesh Khara, MD, SBI said there is immense value in the company, and more so because the country is going in for more and more digitisation. The valuation of the SBI Card business could be more than Rs 6,500 crore, said Khara in an interview to CNBC-TV18.
As of now leverage on household balance sheets is not high in India but going forward household borrowings will happen through the medium of the card and so are very upbeat on this particular venture, he said.
Therefore, the bank decide to hike their stake from 60 percent to 74 percent in the front-end company and from 40 to 74 percent in the backend company, he added. The money that would be pumped in for increasing these stakes would be around Rs 1,200 crore, said Khara, adding that the money as of now has not yet been put in but has been committed.
When the company was started in 1998, the front-end was marketing and backend was operations but over a period of time the necessary skillsets have been acquired as far as handling large operations are concerned and so keeping the entities separate would lead to redundancies and so going forward plan would look at merging the two, said Khara.
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From E-Group, Banking-News
Banks lost Rs 88,553 an hour to cybercrime in last 3 years
Chethan Kumar The Times of India Published on July 25, 2017
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Bengaluru, July 24: In the past three years and three months, banks lost Rs 88,553 every hour on an average to cybercrime. The total money lost from April 1, 2014 to June 30, 2017 — Rs 252 crore — could have written off 50,400 farm loans of Rs 50,000 each.
Nearly 40 cases of cybercrime costing Rs 21.24 lakh a day on an average have been reported by banks in the said period, shows data of 102 banks of all categories obtained from the Reserve Bank of India. In all, 46,612 cases were reported in the said period.
The data is compiled from frauds related to credit, debit and ATM cards and internet banking.
From card skimming to hacking of bank systems, the growing number of cybercrime cases is not just an indication of vulnerable backend systems but also a warning that the financial system cannot underestimate the threat any longer.
Analysis of data for the first quarter of 2017-18 (April 1 to June 30) shows that banks reported 56 cases a day, against the average of 40 in the past three years.
Banks are also losing more money per day: Rs 21.57 lakh (Rs 89,880 per hour) from Rs 21.24 lakh (Rs 88,553 per hour) in the past three years. These cases are from 23 banks which reported to RBI.
Sanjay Kaushik, managing director of Netrika Consulting Private Limited, which counts several banks as clients, said the majority of these crimes were likely to be debit and credit card frauds to deal with which banks are putting systems in place.
The RBI, on its part, has been regularly advising banks on the need for a strong cybersecurity setup to deal with attacks, while creating awareness among people to prevent them from falling for fake offers used by fraudsters.
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From E-Group, Banking-News
Banking Frauds: Who is Responsible – Bank or You?
The News18 Online Published on July 24, 2017
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New Delhi, July 24: Nowadays, financial transactions have become more web based and electronic exchanges or use of Debit and Credit cards are the go-to mode of transactions. However, with this advancement, notorious hackers have found ways to beat the system and commit theft of e-money, frauds, etc.
The Reserve Bank of India (RBI) came up with draft regulations dealing with banking fraud last year and has officially released these regulations wherein RBI has explicitly laid down the extent to which a customer will be liable in case of an unauthorized transaction/ fraud in the following 3 circumstances - due to the customer's negligence, deficiency/fault in the banking system or due to a third party breach.
As per RBI, electronic transactions can be categorised into 2 ways:
1. Remote/ Online transactions allude to those transactions that don't require the instruments of payment (i.e. currency, Debit/Credit card, etc.) to be displayed physically at the time of a transaction e.g. mobile/net banking, wallets, UPI and so on.
2. Face-to-Face/ Proximity transactions refer to those transactions that need the instruments of payment to be physically present at the time of the transaction e.g. the presence of a Debit/Credit Card is a must during an ATM transaction.
Extent of customer liability is determined based on negligence of the customer or bank or third party. Let's understand these one by one:
I. Negligence of Customer
In circumstances where the bogus transaction has occurred because of the customer's carelessness i.e. the payment details or passwords were shared by the customer with someone else, then until this transaction is reported to the bank, the entire loss will be borne by the customer. However, once the transaction in question is reported to the bank, loss from any fraudulent transaction thereafter will be borne by the bank.
II. Negligence of Banking System
The customer will have absolutely no liability in circumstances where the bogus/unauthorised transaction occurs because of the carelessness of the bank. In this case the customer doesn't even have the obligation to report the fake transaction to the bank. However, it is advisable to keep a close check on all your e-banking accounts and report any suspicious behaviour immediately to your bank.
III. Third Party Breach
When an outsider or third party commits a fraud it eludes to those situations where the inadequacy lies neither with the bank nor with the customer.
In such cases, the extent of liability of the customer depends on when he reports the issue from the day of receiving communication of such transaction from the bank.
1) If the customer reports the unauthorized exchange within 3 days from the receipt of communication from the bank, the liability of the customer will be Zero.
2) If the customer reports the unauthorized transaction in 4 to 7 days from the receipt of communication from the bank, the customer's per transaction limit will be capped, different accounts will have different capped limit, details of which can be taken from the bank officials.
3) If the customer reports the unauthorized transaction in 7 days from the receipt of communication from the bank, the risk/ liability will be decided depending on the policies of the bank.
The number of days should be considered as per the working calendar of the home branch barring the date of receiving communication. Furthermore, the date of receiving communication implies the date when you get SMS, email or the bank explanation that gives you the knowledge about the unauthorized transaction. The earliest communication received has to be considered, on the off chance that you get communicated by the bank in various ways.
Who decides the Liability?
As is clear from above that the extent of your i.e. customer's liability is dependent upon the fact as to whose fault it was. Banks clearly wouldn't want to bear the entire loss themselves and would want that the customer should share the loss be it due to the fact that the unauthorized transaction took place due to the negligence of the customer or it was the result of a third party breach, however in order to do so, the burden of proving the carelessness of the customer, is on the bank.
Things You Must Know About Reversal of Fraudulent Transactions:
1) The RBI circular also stated that banks must refund the amount of the unapproved transaction in the customer's bank account within 10 days from the date when the client reported the unapproved transaction to the bank. However, this can only be possible after determining the extent of customer liability.
2) Banks have the choice to defer any liability of customer that occurred due to the carelessness of the client, try not to wager on it though.
3) After a proper investigation and determination of customer liability the complaint needs to be resolved within 90 days.
4) Banks also guarantee that no loss of interest or additional loss, in case of credit card fraud is incurred to the customer.
5) Such fraudulent/ unapproved transactions can be reported via different channels like online, telephone, SMS, email, etc. and all of these modes usually provide a 24x7 access.
What Can Customers Do to Avoid Banking Frauds?
The banks have done their part and so should the customers, by doing the following:
1) Register your working mobile number with your bank so as to receive SMS/Email alerts regarding transactions.
2) Check the emails and messages received from the bank, regularly.
3) In case you find any suspicious or unapproved transaction that you can't place, consult and report to the bank, immediately.
4) Never share your banking User Id, Password or OTP (One Time Password) with anyone. No bank official will ever call you for these details.
5) Never share your Debit Card/ Credit Card Number or the numbers displayed at their back with anyone as you may end up losing money and be held responsible at the same time.
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From E-Group, Banking-News
No time to lose on consumer protection
Bejon Misra The Business Line Published on July 25, 2017
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Parliament should pass a pending Bill in this regard. Consumers need new norms in the context of e-commerce transactions
It is high time that the long-term Consumer Protection Amendment Bill is passed by Parliament. Consumers continue to be at the receiving end.
For instance, the revelation made in a recent response to an RTI query by the Reserve Bank of India that banks cannot be held responsible for the loss of valuables kept in bank lockers has come as a rude shock. This has put a big question mark over the safety of valuables/documents stored in bank lockers for safe-keeping.
But the crucial issue is this — the proposed Bill requires the inclusion of more provisions to deal with the fast changing technological and market dynamics, e-commerce being the latest.
Many developments which have altered the market dynamic significantly both from a retail and a technological perspective were not envisaged by the creators of the Act. Even after three amendments to The Consumer Protection Act 1986 in 1991, 1993 and 2002, the problems remained unresolved and new ones continue to mushroom.
In a time warp
The Act in its present form is an inefficient piece of legislation, not keeping pace with the new market dynamics, multi-layered delivery chains, and innovative and often misleading advertising and marketing machinery.
The main problem is with the implementation procedure. The Act doesn’t grant the authority to proceed against any person guilty of a violation under the Act or take suo motu cognisance of an unfair trade practice or an action undermining the rights of a consumer. Penal steps can be taken only through a judicial process before the State or District Consumer Redressal Forums.
Unfortunately, as is the case with our judicial machinery, these forums are plagued by administrative issues. For example, the National Consumer Disputes Redressal Commission is grappling with appeals and original complaints filed in the period 2008-2010, which means consumers are being made to suffer for an average of five years to get their grievances redressed.
The Maharashtra State Consumer Disputes Redressal Commission has recently opened up cases kept aside in the sine-die list for the period 1998-2004; this is just an illustration of the ground level scenario from one State.
Thus, in an effort to replace a 29-year-old piece of legislation, the Centre approved a new Consumer Protection Bill 2015 in July 2015. The new legislation seeks to provide a comprehensive framework to protect consumer interest and would ultimately replace the Consumer Protection Act 1986.
The Consumer Protection Bill 2015 was introduced in Lok Sabha on August 10, 2015, by Minister of Consumer Affairs, Food and Public Distribution Ram Vilas Paswan and was opened for comments by the general public and stakeholders; these were reproduced in the report of the Parliamentary Standing Committee on Consumer Affairs published in April 2016.
Innovative changes
The new Bill includes the establishment of an executive agency, the Central Consumer Protection Authority (CCPA), which will protect and enforce the rights of consumers.
The authority will intervene whenever necessary to protect consumers from unfair trade practices and initiate class action including enforcing recall, refund and return of products. This body will act in a manner similar to enforcement agencies in other jurisdictions such as the Federal Trade Commission (FTC) in the US. This will be a landmark step in upgrading the implementation mechanism to global standards.
Besides, in order to ensure safe products to consumers, the Bill has a provision for product liability and provides enough powers to the regulatory authority to recall products and cancel licences if a consumer complaint affects more than one individual.
This is the first time that powers to take action for damage caused by a product have been introduced in a consumer protection framework. This step will act as a deterrent for manufacturers since the liability quotient has increased.
The Bill also has several provisions aimed at simplifying the consumer dispute resolution process. They include enhancing the pecuniary jurisdiction of the Consumer Grievance Redress Agencies, power to State and District Commissions to review their orders, and setting up a ‘circuit bench’ in order to facilitate quicker disposal of complaints.
The Bill also proposes to set up Consumer Mediation Cells which will be attached to the redressal commissions at the district, State and national levels which will further help reduce the backlog of cases and lessen the strain on redressal forums.
Hopefully, these proposals will lead to significantly reducing the huge backlog of cases and prevent further stalling of disputes. The new Bill is proposed on the lines of institutions in the US, and in European countries which provide that a consumer protection law should derive its basis from the contract law and the law of sale of goods, without which the law of consumer protection tends to be confusing and conflicting.
Covering e-commerce
Due to tremendous increase in the popularity of e-commerce, the proposed amendment attempts to include e-commerce transactions under the ambit of the Act. Under the current Consumer Protection Act, a consumer can initiate legal action against a seller only in the place where transaction takes place. The new Bill contains an enabling provisions for consumers to file complaints electronically, and in consumer courts that have jurisdiction over the place of residence of the complainant.
At present, the Government has made about 80 changes in the Bill which will replace the Consumer Protection Bill introduced in Parliament in 2015 based on recommendations of the Parliamentary Standing Committee. The committee, among other things, has recommended stringent provisions to tackle misleading advertisements, as well as to fix liability on endorsers and celebrities.
The Bill was proposed to be tabled in the last Budget session but since the amendments were not incorporated it wasn’t tabled. The delay has extensive negative ramifications which will expand exponentially unless a new framework is brought about.
The Centre has been introducing several policy measures to improve the economic climate in the country in order to attract more investments. Introduction of GST is the most recent amongst these measures.
But policymakers and law-makers must understand that in the absence of an effective, modern and updated consumer protection framework, these initiatives will be akin to watering a dead plant. Consumers are the backbone of the economy and no actual progress can occur without safeguarding their interests. Parliament should pass the pending Bill in the forthcoming monsoon session.
The writer, a board member of FSSAI and Governing Council member of the Consumer Coordination Council, is the founder of Consumer Online Foundation
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From E-Group, Banking-News
Bad loans: RBI's priority is resolution not liquidation, says Deputy Governor Mundra
Latha Venkatesh The CNBC-TV18 Online Published on July 24, 2017
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Big defaulters were given ample time before bankruptcy proceedings were initiated, he said SS Mundra, Deputy Governor
Mumbai, July 24: "Resolution not Liquidation" is the Reserve Bank of India's (RBI) primary goal for large bad loan cases, said Deputy Governor SS Mundra.
His term will end in a few days from now. In his exit interview to CNBC-TV18's Latha Venkatesh, Mudra asserted that big defaulters were given ample time before bankruptcy proceedings were initiated. He said that there cannot be any more "dilly-dallying" by defaulters.
Below is the verbatim transcript of the interview.
Q: As you lay down office as Deputy Governor, what is the biggest sense of satisfaction you take back?
A: First of all, let me make a couple of quick comments on your opening statement. The Reserve Bank of India (RBI) is very judicious in distributing the leaning. So I would say that all the colleagues, Deputy Governors have equally shared the burden. It is not an individual.
Q: I meant only for commercial insights.
A: I must, in all fairness say that I do not know whether RBI would miss me or not, but I would certainly be missing the RBI. It has been a very interesting and satisfying period.
The supervision department, I must say it had been a period of intensive activities, but more importantly some of the activities which will have a very long-term impact, so while asset quality review (AQR) and what happened around is the most talked about subject in supervision. We have spoken on that many times, so I will park it for the time being. But during this period, the entire approach of supervision, migrating from a traditional transaction
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