Soon, you will have to pay for transactions at your bank’s own ‪ATM‬ too…

Banks seek to cap free ATM use at 5 times per month

MUMBAI: Account holders may end up paying the price of additional security at ATMs in the form of fewer free transactions. The Indian Banks Association (IBA) has proposed that the mandatory five free transactions that banks are required to allow in a month include even the ones at the ATMs of an account-holder's bank.

The proposal comes in the wake of higher charges that banks foresee as they have been directed to provide guards at every ATM and also have electronic surveillance in the form of CCTVs. The instructions have come from state governments in the wake of a brutal attack at an unguarded ATM kiosk in Bangalore last year.

IBA has also supported an increase in charges that banks pay each other when their customers use third-party ATMs from Rs 15 to Rs 18. At present, most banks do not charge account holders if they use the bank's own ATMs. In addition, RBI norms require every bank to allow its customers access to third-party ATMs five times a month without any charge, subject to a maximum withdrawal of Rs 10,000. Some banks provide their customers more than the mandated number of free transactions but this varies from bank to bank.

Addressing reporters, IBA chief executive M V Tanksale said that the increase will not affect most account holders since it allows more than one transaction per week. "For balance enquiry, SMS is a much more convenient option," said Tanksale, adding that reducing the number of free transactions would ensure there is no overutilization of the ATM network.

According to Tanksale, the ATM network of banks is currently around 1.4 lakh and is expected to increase to around 2 lakh in six months. "The viability of this network depends on the migration of transactions from branches to ATMs," said Tanksale. He added that given the size of the network, any increase in costs would translate into an annual increase in cost of thousands of crores.

With ATM networks seeing explosive growth, the RBI has been taking measures to ensure that all constituents are covered. The central bank has said that a percentage of all new installations should be disabled friendly. "IBA has designed a logo to highlight ATMs that are accessible to the visually challenged. This way the public can direct the visually challenged to ATMs that they can use," said Tanksale.

The other problem is that with the sudden spike in installations in the last one year, the average transactions has dropped sharply. With the government proposing to transfer subsidies and other benefits directly to individual accounts, banks are expecting a surge in transactions.

In the early days of shared payment network, banks charged anywhere between Rs 20 to Rs 60 for use of third-party ATMs. Four years ago, RBI directed banks to waive all charges, but later relented and allowed banks to charge beyond five transactions a month. (TOI)

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Banks violate RBI norms to deny zero-balance A/Cs

MUMBAI: Banks have been found to use the Reserve Bank of India's norms as an excuse to avoid opening zero-balance accounts. In a sting operation conducted by a web portal, an IIT Mumbai professor sought to open a basic bank account in 19 banks without address or identity proof. In all the 19 branches, the professor was shooed away although RBI regulations require banks to open a 'small account' without address or identity proof.

The professor's sting operation seeks to expose how banks use the pretext of 'know your customer' guidelines to turn away business that is unprofitable. Incidentally, these are the same banks which fell victim to a sting operation by a web portal which exposed their willingness to violate the 'know your customer' guidelines to grab business. The professor's experience was that the underprivileged were chased away from bank branches by intimidating them, citing RBI norms and account opening requirements ranging from Rs 500 to Rs 3 lakh. The lenders included public, private and foreign banks.

The surprising part was that even when confronted with RBI regulations, nearly all front office staff were clueless. None were aware that RBI norms do indeed allow customers to open an account with zero balance requirement and ATM card facility merely on the basis of an application form, a photograph and a self-declaration.

Ashish Das from the department of mathematics at IIT Bombay conducted the survey across bank branches as part of a study, titled Banks Violating Prevention of Money-Laundering Act for Excluding the Excluded. The study has now been published by the department and also released in the form of a report.

The notification on the basic savings account facility was issued by RBI on August 2012. RBI norms on its website state that a basic account can be opened with simplified KYC norms. But if simplified norms are used, the account would be treated as a 'small account'. In other words, such accounts will be eligible for a maximum balance of Rs 50,000 and maximum withdrawals cannot exceed Rs 10,000 in a month. Also, these accounts cannot be used for receiving money from abroad. While the limits ensure that these accounts cannot be misused for money laundering, it provides individuals without address proof or identity cards the opportunity to maintain savings with banks and also use ATMs.

But rather than open these accounts, banks are instead pushing underprivileged customers to 'business correspondents', who charge for opening bank accounts. Das's report shows that majority of bank employees are unaware that RBI norms allow a small basic bank account on the basis of a mere application form and declaration that proof of address will be provided within a year.

Even at the head office level, the awareness of account opening requirements appear to be low. Six of the banks covered gave RBI norms as a reason not opening the basic accounts.

RBI has not made it any easier for banks to open small accounts. The requirement for banks to open a 'small account,' without address or identity proof, comes in a directive from the finance ministry notification dated December 16, 2010. The reference to the notification on simplified KYC norms is buried in an annexure to RBI on directions for opening small accounts.(TOI)

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Tata Sons withdraws Application for New Bank

The Reserve Bank of India has today communicated that Tata Sons Limited has withdrawn its application made on July 1, 2013 for a new bank licence. 

The company has indicated that its current financial services operating model best supports the needs of the Tata Group’s domestic and overseas strategy, and provides adequate operating flexibility to its companies, while securing the interests of the Group’s diverse stakeholder base. The Reserve Bank has accepted withdrawal of the application.

It may be recalled that the Reserve Bank of India had, on July 1, 2013 placed on its website a list of 26 applicants for new bank licences in the private sector and had intimated the change in the names of applications earlier on September 6, 2013.

The RBI has accepted the application withdrawal request, according to the statement. 

Tata Sons had filed the application on July 1, according to the RBI. Companies in the Tata Group include Tata Consultancy Services Ltd, Tata Motors Ltd, and Tata Steel BSE Ltd. 

RBI said in a press release that has accepted the withdrawal.

That leaves 25 applicants, including the Aditya Birla Group, the Bajaj Group and Anil Ambani’s Reliance Group, in the race for a banking licence.

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SBI's advance tax payout down 40 per cent

Mumbai: India's largest lender, State Bank of India (SBI), said on Sunday that it has paid Rs. 1,120 crore in advance tax for the second quarter as against Rs. 1,820 crore in the corresponding period last year, down nearly 40 per cent.

Its foreign offices paid an additional Rs. 192 crore in tax during the period, the lender said in a statement.

Last Friday, a senior official from the income tax department had said that the department is witnessing a "muted growth" in collections from the Mumbai region, which accounts for over a third of the total collections nationally.

The advance tax pay-out decline from SBI comes amid a period of gloom on the economic front, with the quarterly gross domestic product (GDP) growth falling to a four-year low of 4.4 per cent for the April-June period.

Advance tax is a system of staggered payment of income tax over four quarters, and is generally considered as a barometer of a company's performance during a quarter.
(NDTV)

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Bank reforms: Bad debt in the form of NPAs is not bad news if banks choose to clean up

Our fears outnumber our dangers, goes an old Latin saying. We are reminded of this in the context of the sentiment regarding bad debts on the books of Indian banks.

The concern is valid. But sentiments have overshot. All but one state-owned bank are trading below book value. Actually, banks are in good shape.

Between 2010-11 and 2012-13, overall non-performing asset (NPA) levels of banks went up from 2.5%to 3.5%. This was driven by corporate and small and medium enterprise credit, which accounted foralmost 90% of the growth in badassets.

However, the NPA level in the retail segment has gone down from 3.4% to 2% in these two years. Every category of banks - public sector, old and new private sector - saw a reduction in bad debt in almost all segments of retail lending.

The credit for this goes to the adoption of the credit information bureau in retail lending by the banking industry. Such use of information and technology is not seen yet in commercial funding or agriculture. That is where bad debts have swelled. We have a four-pronged agenda for banks.

First, banks need to leverage information and analytics. Lending is all about information asymmetry. The borrower has the real information. Lenders have to put their money on what they can gather.

All banks have had high-quality core banking platforms for many years. They sit on a massive amount of data that tracks customer transactions for several years.

Enhanced use of analysis on this data should enhance decision making. It can be used to identify warning signals and trigger action before a crisis sets in among borrowers. In some markets, banks are deploying techniques like psychometric profiling of customers to assess risk worthiness.

In India, where financial data is taken with a pinch of salt, surrogate information like utility bill payments could be sourced to enhance the power of analytical techniques. Information bureau services can be adopted with higher fervour.

This Article is written by CMA Samir Biswal. He can be reached at cmasamirbiswal@gmail.com

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Deadline for banks for allocation of Unique Customer Identification Code extended to 31-03-14.

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT) - Unique Customer  Identification Code for Banks Customers in India (UCIC)

1. Please refer to our circular DNBS.(PD).CC.No.325/03.10.42/2012-13 dated May 3, 2013 on the captioned subject, advising NBFCs to initiate steps for allotting UCIC  to all their customers while entering into any new relationships for individual  customers to begin with, and to existing individual customers by end-June 2013 

2. The time for completing the process of allotting UCIC to existing customers is  extended up to March 31, 2014. We, however, reiterate that UCIC should be allotted  to all customers while entering into new relationships. 

To download the Official Notification Click Here.

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