KYC, AADHAAR & RBI RULES’
18 July 2016
It is time to come out and say it openly. Dr Raghram Rajan’s tenure has been a big disappointment when it comes to consumer services of banks. Indeed, the Reserve Bank of India (RBI) framed a wonderful consumer charter during his tenure; but that was in August 2014. The charter that mandated banks to treat consumers fairly remains toothless, since RBI gave them until July 2016 to frame their own rules and self-punishment (if any) for lapses and failures. It is mid-July, as I write this piece, and we have yet to see any bank announce a comprehensive consumer policy for its customers. Instead, here are two separate episodes of 13th July that illustrate how RBI, which oversees how banks behave, has no truck with the everyday frustrations of customers.
Senior journalist Siddharth Bhatia, who does not normally write on banking or business, was moved to writing a column in The Economic Times about how a simple change in address by a couple, turned traumatic because of thoughtless know your customer (KYC) rules specified by RBI. The rule-makers have failed to apply simple logic to their requirements; that regular KYC documents such as an Aadhaar card, passport, driving licence, etc, are redundant as address proof when you move into a new rented flat. The couple submitted a bulky, duly registered and self-attested rent agreement. After much humming and hawing, the husband’s account became operational. The wife’s account was in a limbo. On enquiry, the couple discovered that archaic ‘RBI rules’ apparently required her marriage certificate to be submitted, although she, a working woman, was a signatory to the rent agreement and had a job and the bank account for 13 years.
The bank was adamant that the change of address would not be affected without the marriage certificate. If only RBI had such iron-clad rules to prevent loans leeching into the personal coffers of our industrialists! Also, is this how the government plans to make it easier to rent property, or is it that one arm of government has no clue about the red tape created by another? A third point that Mr Bhatia makes in his article is how the bank, which was adamant about KYC documents, didn’t miss an opportunity to hustle the couple for an insurance policy. Isn’t it safe to bet that mis-selling of insurance to earn commission income remains rampant long after RBI drafted a consumer charter?
On the same day, Shailesh Gandhi, former central information commissioner, told us that he visited HDFC Bank in response to a letter to update his KYC, although he had no change to report—it was mandated by ‘RBI rules’. He had carried his Aadhaar card as an identity proof, which the bank tried to validate on its machine, but it simply would not recognise his thumbprint, despite repeated efforts. Since Mr Gandhi had multiple identification proofs, it did not matter. What was significant, though, is that the HDFC Bank official told him that the failure to validate thumbprints was fairly routine! He proudly informed Mr Gandhi, that the machine fortunately recognised his own fingerprints.
When you consider that Aadhaar is virtually the only identity proof for JanDhan accounts, we wonder when we will start to hear more stories about validation problems. What about all other government benefits and services where Aadhaar has been mandated? Does anyone bother to validate the Aadhaar number? How well is online authentication with the Unique Identity Authority of India (UIDAI) working? Nobody really knows.
A third case is that of Captain Ashok Malkani, trustee of vCitizens Action Network. A ‘Diamond’ customer of Bank of India with an account for 40 years, he is being given the run-around since February on account of its ATM that not only failed to dispense money, but debited his account twice (Rs15,000x2) since he made two attempts at withdrawal. The Bank claims that the money has actually gone out of its accounts, but won’t produce the videotapes that would show that it was dispensed to Captain Malkani by the ATM. ‘RBI rules’ require a bank to reimburse a customer within 12 days when his account is wrongly debited, or pay a fine of Rs100 per day. But what happens when the bank falsely claims that the money has been debited from its books and won’t produce any evidence? Are there no consequences for Bank of India for treating a customer so shabbily?
Captain Malkani’s case is especially shocking because he is connected with two well-known consumer activists. Even the Mumbai Grahak Panchayat has similar complaints about public sector banks refusing claims of faulty ATMs that fail to dispense cash after debiting customer accounts. Forget about fair treatment or compensation to consumers, the bank is not even under pressure to provide proof. Readers may recall a recent column where SS Mundra, RBI’s deputy governor, had talked about issuing regulatory directions to limit customer liability for electronic banking transactions and credit card fraud. Mr Mundra pointed out that its survey of 4,000 bank ATMs across the country revealed that 1/3rd of them were not working at that point of time. How many of these ATMs that work are harassing customers by failing to dispense cash? What does RBI plan to do about them?
While RBI refuses to act even under the leadership of a ‘rockstar’ governor, banks are complacent and continue to hike charges for consumer services without worry. Meanwhile, RBI’s foot-dragging over licensing new banks ensures that customers have no real option even if they want to vote with their feet and switch to another bank.
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