Centre's 'rigid stand' on pension updation drives RBI staff to go on mass leave

The Centre’s rigidity on pension updation is forcing employees and officers of the Reserve Bank of India (RBI) to react and go on a two-day mass leave on September 4 and 5.

“We have waited patiently for long and persuaded various authorities quietly and in a peaceful manner,” the United Front of Reserve Bank Officers and Employees (UFRBOE) said.

Successive RBI Governors and its Central Board have been sympathetic and have repeatedly taken up the pension updation issue with the Centre but of no effect, UFRBOE leaders Samir Ghosh, Suryakanta Mahadik, Keshav Jagtap and Ajay Kumar Sinha said in a statement.

RBI has a pension corpus fund of about ₹16,000 crore, borne out of its contribution on account of employees’ provident fund. This is sufficient to defray the expenses of pension updation and one more option, without any cost to the exchequer, unlike in the case of Central Government retirees.

In 2011, RBI had formally requested the Centre to allow it to extend one option for retirees willing to switch over to pension, in view of the improvements in pension regulations and wage revisions.

‘Arbitrary’

In 2014, RBI had formally proposed that the pension amount of old pensioners, who are suffering, be improved, the UFRBOE leaders said. Last year, the Parliamentary Committee on Subordinate Legislation had unanimously recommended that RBI be allowed to extend one more option of pension.

It termed the Centre’s conduct in this regard as ‘arbitrary’, ‘illegal’ and ‘whimsical’. RBI is within its powers to improve its pension scheme. The report was submitted to the Centre, but was returned.

In October 2017, the RBI Governor formally wrote to the Centre, quoting extensively from the Parliamentary Committee report that the central bank would like to improve pension and provide option.

The Centre’s argument is that agreeing to RBI’s proposal will increase expenses and give rise to ‘contagion effect’, which is absolutely untenable, UFRBOE argued.

Firstly, the amount will be entirely borne by RBI from its own pension fund, whereas the Centre’s pension updation scheme for its pensioners is burdening the exchequer and adding to the fiscal deficit. Besides, the Centre recently updated the pension of 25,000 professors and non-teaching staff of UGC sponsored Universities.

The Centre has also introduced pension for 94,000 serving and 55,000 CPSE retirees. Being the largest employer, the Centre itself creates the contagion effect by periodically updating the pension of 55 lakh Government retirees.

Having given this benefit to its own pensioners, it cannot stand in the way of extending the same benefit to a few thousand RBI pensioners, whose entitlements in view of rapidly increasing costs are absolutely meagre, UFRBOE said.

Left out

Providing a brief backgrounder, UFRBOE said that pension was introduced in RBI with effect from January 1, 1986, in lieu of contributory provident fund (CPF).

An assurance was given that it shall generally be on the lines of Central Government Pension Scheme (CGPS) and any improvement in the latter will be extended to RBI pensioners.

As the Centre improved pension periodically with every pay revision, the pension in RBI was also brought in alignment with the pay scale of 1997–2002 covering pensioners up to October 2002. This was, however, objected to by the Ministry of Finance which forced the withdrawal of the same in 2008, despite a Bombay High Court directive.

The policy had to be jettisoned under the Centre’s directive, resulting in stagnant basic pension for pensioners despite intermittent wage revisions for staff. When employees were given the option for a switchover from CPF to pension, a few employees could not opt. After giving four such options up to the year 2000, the Centre put an embargo on any further options.

This excluded about 2,600 employees, many of whom, having retired now, have been in penury as the market interest rate has plummeted to an abysmal low. Their paltry retiral amount of CPF now fetches almost nothing.

RBI Drives the Final Nail in the Demonetisation Coffin

The Reserve Bank of India's annual report for 2017-2018, was released yesterday. The central bank made some interesting observations regarding demonetisation. Let's take a look at them, one by one.

1) On November 8, 2016, the Narendra Modi government demonetised Rs 500 and Rs 1,000 notes. The total value of these notes was at Rs 15.44 lakh crore. These notes had to be deposited into banks before December 30, 2016.

The ministry of finance press release accompanying this decision had said that the idea behind demonetisation was to eliminate "Black Money which casts a long shadow of parallel economy on our real economy". The press release also pointed out: "Use of high denomination notes for storage of unaccounted wealth has been evident from cash recoveries made by law enforcement agencies from time to time. High denomination notes are known to facilitate generation of black money."

How would demonetisation achieve this? On November 10, 2016, the finance minister Arun Jaitley explained the logic in an interview, where he said: "Obviously people who have used cash for crime purposes are not foolhardy enough to try and risk and bring the cash back into the system because there will be questions asked."

Things did not turn out to be as obvious. The Reserve Bank of India (RBI) in the 2017-2018 annual report has said that the processing of the demonetised notes has been completed. Rs 15.31 lakh crore worth of notes were deposited back into the banks. This made up for 99.3% of the demonetised notes. In the process, everyone who had black money held in the form of cash, deposited money into the banks, and more or less got away with it.

2) The currency in circulation as on March 31, 2018, stood at 18.29 lakh crore. The RBI said this amounted to 101.8% of the pre-demonetisation level currency. As the economy grows the currency in circulation is bound to grow. Hence, we need to look at currency in circulation as a proportion of the gross domestic product (a measure of economic size).

As of March 31, 2018, the currency in circulation was at 10.9% of GDP. Take a look at Figure 1, which plots the currency to GDP ratio.

Figure 1:  

As of March 31, 2017, the currency in circulation was at 8.8% of the GDP. A year later it had risen to 10.9% of the GDP. As the RBI annual report put it: "India's currency to GDP ratio moved up to 10.9 per cent in 2017-18, returning to being amongst the highest levels of currency usage in peer emerging market economies (EMEs) and advanced economies (AEs) as well."

Everyone who had said that demonetisation will lead to a lower currency in circulation has proved out to be wrong. Also, the currency in circulation as a proportion of the GDP is still growing, and in a year or two, should reach its earlier level of 11.5-12% of the GDP. Of course, this comes with the caveat that the Indian economy, keeps growing at 7-8%.

Also, the increase in currency in circulation is good news. It tells us that the ill effects of demonetisation are finally going away. An increase currency in circulation is a good indicator of the fact that people are back to carrying out economic transactions the way they were before demonetisation. And this will only add to economic growth.

3) Demonetisation was also supposed to increase digital payments. While, this aim wasn't mentioned in the original press release, it first found a mention in the mann ki baat programme in late November 2016. In this programme Modi said: "The great task that the country wants to accomplish today is the realisation of our dream of a 'Cashless Society'. It is true that a hundred percent cashless society is not possible. But why should India not make a beginning in creating a 'less-cash society'? Once we embark on our journey to create a 'less-cash society', the goal of 'cashless society' will not remain very far."

This is what the RBI says in its latest annual report regarding digital payments: "The use of digital payments, which had surged to a peak in December 2016 in the aftermath of demonetisation fell back to the elevated post demonetisation trend before rising in recent months."

The point being that digital payments have gone up a little in comparison to the past. Nevertheless, they were growing even before demonetisation. And if all the handholding on the digital payment front that the government has carried out post demonetisation, would have been carried out even without demonetisation, the digital payments would have grown any way.

4) The high denomination Rs 500 and Rs 1,000 notes formed around 86% of the currency in circulation, before the were demonetised. As the press release accompanying demonetisation pointed out: "High denomination notes are known to facilitate generation of black money.In this connection, it may be noted that while the total number of bank notes in circulation rose by 40% between 2011 and 2016, the increase in number of notes of Rs 500/- denomination was 76% and for Rs 1,000/- denomination was 109% during this period."

Post demonetisation, the high denomination notes of Rs 500 and Rs 2,000, form around 79% of currency in circulation. While this lower than the pre-demonetisation level, the difference isn't really much.

Also, if the idea was to make it difficult for people to store black money in the form of cash, the basic question of how does replacing a Rs 1,000 note with a Rs 2,000 note help, remains.

5) The RBI annual report also points out that the "deposit growth slowed sharply after the post-demonetisation bulge of the preceding half and also reflected the pronounced deceleration in domestic economic activity in the first quarter of 2017-18."

Deposit growth slowed sharply primarily because of a slowdown in economic activity. In order to save money, people need to first earn it, and that is difficult in an environment where economic activity has slowed down.

6) Demonetisation also aimed at eliminating fake notes. As the press release accompanying demonetisation pointed out: "Fake Indian Currency Notes (FICN) in circulation in these denominations are comparatively larger as compared to those in other denominations. For a common person, the fake notes look similar to genuine notes. Use of FICN facilitates financing of terrorism and drug trafficking... New Series bank notes of Rs.500/- and Rs.2,000/- denominations will be introduced for circulation from 10th November, 2016. Infusion of Rs.2,000/- bank notes will be monitored and regulated by RBI. Introduction of new series of banknotes which will be distinctly different from the current ones in terms of look, design, size and colour has been planned."

The point being that the new notes of Rs 500 and Rs 2,000 will be difficult to fake. In fact, that hasn't turned out to be the case. As the RBI annual report points out: "In the Mahatma Gandhi (New) Series of banknotes in the denominations of Rs 500 and Rs 2,000, counterfeit notes detected during 2017-18 were 9,892 and 17,929 as against 199 and 638, respectively."

To conclude, the RBI annual report of 2017-2018, is the last nail in the demonetisation coffin. It was a huge mistake on part of the government. While the Modi government will not admit to it, but the fact that they rarely talk about the success of demonetisation these days, is evidence enough.

FROM VIVEK KAUL'S DAIRY

Details of 8th round 10th bipartite talk held on 29.08.2018 aat Mumbai

Forwarded mgs received ...

Bipartite Talks with IBA

As informed earlier, another round of Bipartite Talks (8th round of Small Committee discussions) was held by Indian Banks’ Association with our 5 Workman Unions yesterday at Mumbai.

IBA team consisted of:

Shri Rajkiran Rai G (MD/CEO, Union Bank of India)–Chairman of the Committee

Shri B. Rajkumar, Dy. Chief Executive, IBA,

Shri M.K. Gupta, GM-HR, Bank of India,

Shri Punit Jain, GM-HR, PNB,

Shri T.S. Seshadri, GM-HR, Indian Bank,

Shri S.K. Suri, GM-HR, Allahabad Bank

Shri Sanjay Prakash, DGM-HR, SBI.

Shri S.K Kakkar, Sr. Advisor-HR&IR, IBA

Shri K S Chauhan, Sr.Vice President, HR&IR, IBA

Our team consisted of representatives from our 5 Workman Unions as under:

Com. C H Venkatachalam, AIBEA

Com. Rajen Nagar, AIBEA

Com. S K Bandlish, NCBE

Com. Balaji, NCBE

Com. Pradip Biswas, BEFI

Com. Subhash Sawant, INBEF

Com. Upendrakumar, NOBW.

The meeting took stock of the discussions held so far in the last 7 rounds of talks held between our Unions and the IBA’s Small Committee team and arrived at the following tentative understandings:

● Settlement will be effective from 1-11-2017

● Settlement will cover 37 Banks (20 PSBs, 10 Private Banks and 7 Foreign Banks). Mandate to be received from IDBI Bank, Catholic Syrian Bank and Royal Bank of Scotland.

● When an employee is transferred from one station to another, instead of normal HRA, he/she will be paid HRA on Rent Receipt basis. Suitable ceilings will be prescribed.

● Branches located in Special Economic Zone/EPZ, etc. to be paid HRA at par with Project Areas.

● Notice period for availing Privilege Leave (other than for LFC) will stand reduced to 10 days.

● Privilege leave taken on sick grounds when there is no sick leave, will not be counted as an occasion of availing PL.

● Beyond 30 years of service, additional sick leave will be granted at 1 month per year subject to a max. of 720 days in entire service (it is 630 days now) i.e. 3 months additional sick leave.

● Women employees can avail sick leave for the sickness of their children (up to 8 years of age) on production of medical certificate.

● Extra ordinary Leave on loss of pay can be availed for 120 days at a time (it is 90 days now).

● Maternity Leave can be availed in combination/continuation with other kind of leave.

● Medical Bills for Maternity can be given after joining the Bank after availing ML irrespective of period.

● 2 months leave with salary will be granted for Hysterectomy where ML limit is exhausted.

● Paternity Leave can be sanctioned even in case of child adoption.

● Absence from office due to curfew, riots, prohibitory orders, natural calamities, flood, etc. will be treated as special leave on duty.

● LFC: permissible Distance will be revised as 2200 km/4400 km for non-substaff and 2600 km/5200 km for substaff (only for actual travel and not for encashment).

● Road Mileage charges will be revised from Rs. 6 per km to Rs. 8 per km.

● Train fare by Shatabdi and Rajdhani express trains (non-Executive Class) will be reimbursed under LFC if travel is undertaken by these trains. (For encashment, existing rules will continue).

● Charges for local sightseeing while on LFC will be reimbursed within the entitlement on production of bills from approval operators.

● GST charges on train fare will be reimbursed.

● For employees working in North East States, LFC will begin from Guwahati and the fare from their place of work to Guwahati will be additionally paid. Similarly, Andaman Nicobar islands to Chennai/Kolkata, Lakshadweep to Kochi, far-flung area branches in Himalayas and J&K to nearest major railway station will be additionally reimbursed under LFC in addition to normal entitlement.

● For actual travel under LFC, train fare under dynamic fare system as on the date of booking of tickets will be reimbursed.

● One more option will be given to choose between 2 years block and 4 years block.

● Income criteria for definition of dependents will be revised from Rs. 10,000 to Rs. 12,000.

● Employees removed from service under Voluntary Cessation Scheme will be eligible for retirement benefits including pension, if otherwise eligible.

● Employees removed from service under Voluntary Cessation Scheme will be given the chance to represent against the decision.

● Facility of Crèche for children of women bank employees will be examined in the light of Government guidelines.

● For employees transferred out of station under Deployment policy, the compensation amount will be revised from Rs.400 to Rs.600 per month.

● When employees shift their personal effects while on transfer to another station, Breakage charges will be paid at Rs.1650 for clerks and Rs.1100 for substaff ( on production of receipt) or Rs.1100 for clerks and Rs.825 for substaff (on Declaration basis).

● For definition of Family, physically/mentally challenged children of employees will continue to be treated as dependents even after their marriage subject to income criteria.

● Revision/increase in Conveyance Allowance to Physically Challenged employees will be suitably recommended to the Government.

● Our demand for exemption of entire retirement benefits from the purview of Income Tax will be recommended to Government for their consideration.

● Service Charges under New Pension Scheme will not be recovered from the employees and will be paid by the Banks.

● When employees are sent to outstation for official duties, the rate of Diem Allowance/Halting Allowance will be increased after further discussions.

● Guidelines will be worked out for reimbursement of Hotel Rent in such occasions subject to certain agreed ceilings.

● Increase in Ex-Gratia amount payable to pre-1986 retirees/surviving spouse will be recommended to Government.

● Other Allowances like Cycle Allowance, Washing Allowance, Split Duty Allowance, etc. will be increased by 15%.

Issues to be discussed further/to be finalised:

° Total quantum of increase in wages

° Index point for merger of DA to work out the new Pay Scales

° Merger of Special Allowance with Basic Pay

° Revised DA formula

° Revision in Special Pay, FPP, PQP

° Improvement in Stagnation increment

° Increase in HRA, Transport Allowance

° Leave Bank system, Child Care Leave, Sabbatical Leave, Increase in Privilege leave /Encashment of PL

° Increase in Annual medical Aid and improvement in Medical Insurance Scheme

° Improvement in formula for calculation of Gratuity

° Separate entitlement of LFC for husband and wife working in the same Bank

° 5 Day Banking

° PF contribution @12%

° North East Allowance

° Improvement in formula for Family Pension

° Periodical updated of Pension

° DA linked Pension in lieu of NPS for new recruits

° Bringing all categories of pensioners to common Index level of 11th BPS.

° Disciplinary Action procedures, punishments, etc.

Next round of meeting of the Full Negotiating Committee will be held by the first week of September, 2018. Further developments will be informed to members in due course.

Government has asked RBI to prepare a list for PSB merger

In a bid to strengthen the banking system laden with bad debt, the government has asked the Reserve Bank of India to prepare a list of public sector banks that can be merged.

The finance ministry has also asked the central bank to suggest a timeframe for the consolidation. The move is aimed at creating better capitalised and fewer lenders and improving regulatory oversight.

Government-controlled lenders are estimated to be holding 90 percent of the non-performing loans and 11 out of the 21 PSBs are operating under PCA.

Reserve Bank of India said today that banks will witness further deterioration in their non-performing assets due to the "economic situation prevailing" in the current fiscal.

As per RBI's Annual Report 2017-18, gross non-performing assets (GNPAs) plus restructured standard advances in the banking system remained elevated at 12.1 per cent of gross advances at end-March 2018.

Detailed report of Dharna Held On 24 August At Jantar Mantar Delhi

Detailed report on the deliberations of today's events of the historic Rally and Dharna held t  on 24.08.18 at at Jantar Mantar, New Delhi.

*All members of preparatory committee consisting of Shri Anil Srivastava, Jugal Kishore Julka, Arvind Sinha, Mohan Badi, Harihar Sinha and Headed by Dr Indrajit Sanyal made tremendous job by working day night to make the arrangement marvellous.*

All the participants started coming from 10 am today morning at Janpath, New Delhi and within a short time there was a large gathering at this venue and the participants started wishing each other as probably it was the first time the old friends met after decades.
The rally started around at 11.15 am with the march by the participants in a disciplined manner in rows with beautiful colourful posters and playcards holding in their hands with slogans and demands written on them. The participants were shouting slogans  with lot of enthusiasm on way to the main dharna venue at Jantar Mantar. The shouting of slogans and dancing by few senior citizens added more colour to the rally of veterans and both side of road many people were seen to watch the March with curiosity and clapping some times.The entire march took place under police ptotection deployed for the purpose.

The Dharna event started with a inaugural address by Shri Harihar Sinha from Bihar a member of the prepatory committee of AIBIRF. He welcomed the participants with open heart and invited the suggestions from all and to invited if anybody wants to speak on this occasion. The following members spoke  in detail about the various demands of pensioners :

1. Sh Jugal Kishore Julka, Canara Bank.
2. Sh Mohan Badi, United Bank of India.
3. Sh. Ram Kishan Bairwa, Syndicate Bank
4. Sh D K Malhotra, P & S Bank
5. Sh Prakash Purohit, Bank of India
6. R C Kataria, Syndicate Bank
7. Sh. Kamal Patni, U Co Bank
8 Sh. Yog Raj Garg, SBI
9 Sh. T N Goel, SBIOA, President
10. Sh D K Sahni, PNB, Agra
11. Smt Asha Sharma, SBP, Patiyala and many more.

The space at *JANTAR MANTAR* Dharna Place was full of retirees to mark the occasion and to support demands.

*It was surprised to all of us that delegates from all corners of whole of India participated apart from Delhi activists including MP, Bihar, UP, Jharkhand, Haryana, Gujarat, Karnataka, AP, Punjab, Tamilnadu even J&K and Assam were present.*

The long pending demands of Pensioners discussed in today's meetings are :

1. Pension Updation
2. Family Pension
3. Re-notification of Gratuity wef 01.01.2016
4. Reduction in premium of medical insurance
5. No Income Tax on Pension
6. Pension Fund should have Pensioners as Trustees
7. No BPS negotiations without Pensioner Representatives

The Keynote address was delivered by Dr. Inderjit Sanyal wherein he explained in detail about the Forum, it's working and the ways and means to redress the grievances of the Pensioners pending for the last more than two decades by taking up the matter with various govt authorities and helping and filing of various pending court cases. He has assured all the participants to send any of their demands to the Forum very freely. He also invited all the various groups of Pensioners to come to us, sit with us and join with us to jointly fight for the cause of Pensioners to get justice for them in future. He also invited all the participants to become the members of the Forum and bring as many more to become members so as it will become easy to legally fight for pensioners. He also informed the participants to fight with IBA that the BPS talks about Pensioners should be held with Pensioners Forum and not with any other Union or Association.

Mr Goel also spoke in strong words that Pension Fund should be used for the Pensioners only and for no other purposes. The Pensioners should be also made Trustees of the Pension Fund to have a better management of the Fund. The Insurance Premium should not be increased from its present level in future for Pensioners.
Mr Kamal Patni of Ratlam and Mrs Asha Sharma from Patiyala strongly advocated that Gratuity should also be made effective from 01.01.2016 urgently as various Govt undertakings are rewarded retrospective effect and discrimination made for bank retirees.
The meeting ended with a vote of thanks by Sh Ramesh Bhateja of SBBJ now State Bank.
Thanks to all.

Public Sector Banks Have No Business Model

By the time August comes around, the rains in Mumbai have slowed down. The August rain in Mumbai is more like the romantic rain of Pune, where you can walk hand in hand with your partner, as the rain god smiles.

In this romantic rain late yesterday evening, I stepped out to look for a kaali-peeli, with the Uber prices reaching very high levels, on yet another weekend evening. As soon as I stepped out of my building I realised that I wasn't carrying enough cash to be able to pay the cab fare.

This meant that I would have to go to an ATM to withdraw money. The ATM closest to where I live, as usual had the out of cash sign on display. The second ATM I went to had the following sign on display.

You think you have seen almost everything, when it comes to the public sector banks in India.

And then you see this.

This is the most basic of things, which every bank should be able to take care of (and I am not even talking about the spelling mistakes in Hindi). One honestly wonders, if the public sector banks cannot even handle these basic things, should they even be in the business of banking.

At the heart of banking is the concept of maturity transformation, where lenders lend money to the bank for the short-term, and the bank in turn lends out money for the long-term. In this way, the short maturity of the deposit is turned into a longer tenure of the loan.

Let's take an example of home loans given by banks. The bank borrows money in the form of fixed deposits. Most fixed deposits tend to have a tenure of five years or lower.

On the other hand, home loans are typically given out for a tenure of 15 to 20 years. Basically, by borrowing in the short-term and lending for the long-term, a bank makes money, on the difference in interest rates. The key word here is that the bank has to "lend," to be viable.

Let's look at the Figure 1, which basically plots the credit deposit ratio of public sector banks, at the end of every financial year, over the last few years. The credit deposit ratio is obtained by dividing the total credit outstanding at the end of the year by total deposits that the bank has at the same point of time.

Figure 1: Credit deposit ratio of public sector banks  

What does Figure 1 tell us? It tells us that the credit deposits ratio of public sector banks has been falling over the years. As on March 31, 2013, the credit deposit ratio of public sector banks had stood at 77.8%. This basically meant that more than three-fourths of the deposits had been given out as loans.

As on March 31, 2018, the credit deposit ratio had fallen to 69%. What does this mean? It basically means that banks are not able to carry out enough lending against all the deposits that they have raised over the years.

In fact, Figure 1, does not tell us gravity of the situation. For that we need to plot the incremental credit deposit ratio i.e., the total loans given during the course of any year by these banks divided by the total deposits raised during the same year. Let's take a look at Figure 2.

Figure 2:  

What does Figure 2 tell us? It tells us that over the years the total amount of credit given by public sector banks against the deposits raised, during the course of a year, has come down dramatically.

In 2012-2013, more than 80% of the deposits raised were given out as credit. In 2016-2017, not a single new rupee of loans was given. In fact, the total outstanding credit of public sector banks, actually contracted. In 2016-2017, the banks raised Rs 5,90,604 crore of deposits, without giving a single rupee of a new loan, on the whole. This was primarily on account of demonetisation.

This meant that the maturity transformation model of banking totally collapsed for public sector banks. In 2017-2018, the banks have been able to reverse it and lend close to 75.5% of the deposits raised during the year. Nevertheless, in absolute terms the overall lending was a very low Rs 1,40,118 crore. In comparison, the public sector banks had lent Rs 6,28,209 crore, during 2013-2014.

Of course, over the years, a lot of lending carried out by public sector banks has gone bad. Having said that, if these banks are to be in the business of banking, they need to be able to lend money. There is no point in raising money from people in the form of deposits, and then not lending it or simply investing all the money in government bonds (something that the government would love, but will hurt the overall economy).

What does not help that 59.4% of deposits of public sector banks as on March 31, 2018, were term deposits, on which banks pay a higher rate of interest in comparison to current and savings account deposits. Hence, giving out loans is important.

Of course, in the past I have talked about narrow banking i.e. most public sector banks should be allowed to make "only" retail loans. While that is already happening at some level, the smaller public sector banks need to be given a full fledged mandate to do just that.

Now let's take a look at the incremental credit deposit ratio of private sector banks, in Figure 3.

Figure 3:  

Figure 3 tells us very clearly that the incremental credit deposits ratio for private sector banks is significantly higher than the public sector banks. In 2016-2017, it reached a low of 67.2%. This was a year, when public sector banks did not lend any fresh money, on the whole.

In this scenario, it is worth asking do the public sector banks have the wherewithal to take on private sector banks, especially the new generation private sector banks?

My answer is no. As I have mentioned in the past, the privatisation of the Indian banking sector has already started and in the years to come, it will only go from strength to strength.

Regards,


Vivek Kaul
Editor, Vivek Kaul's Diary

State Bank of India, Chairman: Not only Govt but Judiciary too responsible for India’s NPA crisis

Judges and Babus

State Bank of India Chairman, Rajnish Kumar stated that,”The government, industry and the judiciary too played a role in the buildup of India’s non-perfoming assets (NPA).

While addressing a Banking Conference he stated that,“I would say everybody is responsible, be it the bankers, be it the industry or borrowers, be it the government, and without inviting contempt of the court, even the judiciary has played a role in this situation”.

Kumar stated that NPAs for public sector banks were higher due to government-sponsored schemes and targeted lending.

While commenting on Insolvency and Bankruptcy Code and the Reserve Bank of India’s February 12 circular on speedier recovery of bad loans, Rajnish Kumar added that these two rules were game-changers.

He stated that,“These laws will bring discipline in credit markets which was lacking prior,” he said, adding every capitalist economy needed an insolvency court.

He said the relationship between bankers and the industry was built on trust. “In several cases there has been a serious breach of that trust, maybe the verification process was missing.”

Delayed response by bankers was also a factor in aggravated NPAs, he said.

Can a fraudster withdraw money from my Aadhaar linked bank account if he knows my Aadhaar number or has my Aadhaar card?

 A bank account cannot be opened merely on the basis of submission of a physical Aadhaar card or its photocopy without biometric or OTP authentication by the bank, according to the UIDAI. Under the PML Rules and RBI circulars, to open a bank account, the bank is required to do biometric or OTP authentication and other due diligence before accepting Aadhaar for banking transaction or KYC of the customer. 

So no one can open a bank account in your name without your verification through biometric/OTP etc, as per FAQs released by the authority today. If however, a bank Account is opened by accepting Aadhaar without biometric or OTP authentication and other verification,then the bank will be held responsible for any loss. 

An Aadhaar holder cannot be held responsible for bank’s fault. It is just like if some fraudster opens a bank account by presenting someone else’s Voter card/Rationcard, it is the bank that would be held responsible not the voter or ration card holder. Till date no Aadhaar holder has suffered any financial loss on account of such misuse. 

The above clarification was given in response to the question what happens if some fraudster who obtains a copy of my Aadhaar card andtries to open a bank account in my name without my knowledge. Will I not be harmed? 

What happens if some fraudster who obtains a copy of my Aadhaar card and tries to open a bank account in my name without my knowledge. Will I not be harmed? 
One must keep in mind that a bank account cannot be opened The above clarification was given in response to the question what happens if some fraudster who obtains a copy of my Aadhaar card andtries to open a bank account in my name without my knowledge. Will I not be harmed? 

What happens if some fraudster who obtains a copy of my Aadhaar card and tries to open a bank account in my name without my knowledge. Will I not be harmed? 
One must keep in mind that a bank account cannot be opened merely on the presentation or submission of a physical Aadhaar card or its photocopy. Under the PML Rules and RBI circulars, to open a bank account, the bank is required to do biometric or OTP authentication and other due diligence before accepting Aadhaar forbanking transaction or KYC. So no one can open a bank account in your name without your verification through biometric/OTP etc. 

however, a bank account is opened by accepting Aadhaar without biometric or OTP authentication and other verification, then the bank will be held responsible for any loss. An Aadhaar holder cannot be held responsible for bank’s fault. It is just like if some fraudster opens a bank account by presenting someone else’s Voter card/Rationcard, it is the bank that would be held responsible not the voter or ration card holder. Till date no Aadhaar holder has suffered any financial loss on account of sch loss

There are many agencies that simply accept physical copy ofAadhaar and do not carry out any biometric or OTP authentication or verification. Is this a good practice?Aadhaar is to be accepted as a proof of identity only after proper authentication under the Aadhaar Act. Also, UIDAI strongly recommends that if authentication facility is not available, the verification of Aadhaar should be done offline through QR code available on the physical Aadhaar copy. If any agency does not follow these best practices, then that agency will be fully responsible for situations or losses arising out of possible misuse or impersonation. An Aadhaar holder is not responsible for the wrongful act of or by any agency. 

Recently, UIDAI has issued an advisory asking people not to share their Aadhaar number openly in the public domain especially on Social Media or other public platforms. Does this mean that I should not use Aadhaar freely? .. 

You should use your Aadhaar without any hesitation for proving your identity and doing transactions, just like you use your bank account number, PAN card, debit card, credit card, etc., wherever required. What UIDAI has advised is that Aadhaar card should be freely used for proving identity and doing transactions, but should not be put on public platforms like Twitter, Facebook, etc. 

People give their debit card or credit card details or cheque (which has bank account number) when they purchase goods, or pay school fee, water, electricity, telephone and other utility bills,etc. Similarly, you can freely use yourAadhaar to establish your identity as and when required without any fear. While using Aadhaar, you should do the same level of due diligence as you do in case of other ID cards – not more, not less. 

If Aadhaar has to be freely used for proving identity and it is safe to do so, then why has UIDAI advised people not to put up their Aadhaar number in Social Media or public domain?You use PAN card, debit card, credit card, bank cheques wherever required. But do you put these details openly on internet and social media such as Facebook, Twitter, etc.? Obviously no! You do not put such personal details unnecessarily in public domain so that there is no unwarranted invasion at .. 
public domain so that there is no unwarranted invasion attempt on your privacy. The same logic needs to be applied in case of uses of Aadhaar. 

I gave my Aadhaar card to a service provider for proving my identity. Can anyone harm me by knowing and misusing my Aadhaar number? 
No. Just, by knowing your Aadhaar number, no one can harm you. It’s just like any other identity document such as passport, voter ID, PAN card, ration card, driving license, etc., that you have been using freely for decades with service providers. Aadhaar identity, instead, is instantly verifiable and hence more trusted. 

Also, as per the Aadhaar Act 2016, the Aadhaar card is required to be verified by fingerprint, iris scan, OTP authentication, and QR code. Hence, it is near impossible to impersonate you if you use Aadhaar to prove your identity. People have been freely giving other identity documentssuch as passport, voter ID, PAN card, ration card, driving lic .. 

Can a fraudster withdraw money from my Aadhaar linked bank account if he knows my Aadhaar number or has my Aadhaar card? Has any Aadhaar holder suffered any financial or other loss or identity theft on account of impersonation or misuse?Just like by merely knowing your bank account number, one cannot withdraw money from your account, similarly by merely knowing your Aadhaar number, no one can withdraw money from Aadhaar linked bank account. As in bank for withdrawing money, your signature, debit card, PIN, OTP, etc., is required, similarly for withdrawing money from your Aadhaar linked bank account through Aadhaar, your fingerprint, IRIS or OTP sent to your Aadhaar registered mobile will be required. 

No Aadhaar holder has suffered any financial or other loss or identity theft on account of any said misuse or attempted impersonation of Aadhaar. Notably, everyday more than 3 crore Authentications are carried out on the Aadh .. Aadhaar platform. In the last eight years, so far more than 2,182 crore authentications (till 31st July 2018) have been successfully done. UIDAI keeps upgrading and reviewing its security systems and safety mechanisms to make Aadhaar more secure and more useable. There has not been a single instance of biometric data breach from Aadhaar database.Therefore, people should freely use and give Aadhaar to prove their identity as and when required. 

Why am I asked to verify Bank account, Demat account, PAN and various other services with Aadhaar? 
When you link your bank account, demat account, mutual fund account, PAN, etc., with Aadhaar, you secure yourself because no one can impersonate you to avail these services. Often the fraudsters carry out transactions and transfer money from someone else’s account to their accounts and go untraced as they generally submit their fake identities to the bank while opening ous elements to go untraced and banking as a whole would become more safe and secure as the identity of each bank account holders is established uniquely beyond doubt through eKYC. As of now 96 crore bank accounts out of total 110 crore accounts have been linked to Aadhaar. 

At the same time, you also contribute to serve the vital national interests by making the system rid of bogus, fakes and duplicates who could misuse IDs to evade taxes, siphon off public money, etc. Through use of Aadhaar and other process improvements, the Government has been able to weed out more than 6 crore fakes, duplicates and ghosts beneficiaries and save more than Rs. 90,000 crore of public money. 

Also, ghost and shell entities and companies used to be created for tax evasion, money laundering, terror financing, etc. Verification of identity through Aadhaar has helped curb these practices.Similarly, use of Aadhaar has checked unscrupulous elements that used to resort to impersonation in various examination and tests for college admission and jobs, etc., and thereby denying the genuine candidates of their rightful dues. There are number of other areas where verification of identity through Aadhaar has brought in fairness and transparency in the system. 

Does linking my bank account, PAN, and other services with Aadhaar make me vulnerable? 
No. Does linking my bank account, PAN, and other services with Aadhaar make me vulnerable? 
No. As your bank information is not shared by the bank with anyone else, no one can have information about your bank account just by knowing your Aadhaar number. Also, UIDAI or any entity for that matter would not have any information about your bank account. For example, you give your mobile number at various places and to various authorities such as bank, passport authorities, income tax departments, etc. Would the telecom company have access to your bank information, income tax returns, etc.? Obviously no! Similarly, when you provide Aadhaar number to various service providers, your detail remains with the respective service providers and no single entity including the Government or UIDAI will have access to your personal information spread across various service providers.