Gulf rupee: When the Reserve Bank of India played central banker in West Asia

 Even after Indian independence, the rupee was the legal tender in a few Persian Gulf states. It was replaced with the Gulf rupee in 1959 to curb gold smuggling.

When an Indian traveller wanted to visit certain Persian Gulf sheikhdoms in the 1950s, there was no need to stock up on foreign currency before the journey since the Indian rupee was the legal tender in these countries. For almost all financial transactions, the United Arab Emirates (then known as the Trucial States), Kuwait, Bahrain, Oman and Qatar used the rupee. The system was put in place by the British when they ruled India. But the arrangement suited the Reserve Bank of India as well, as the Gulf countries would purchase the rupees with pound sterling, against which the Indian currency was pegged.

By virtue of the system, India had economic clout in the Persian Gulf states that were still British protectorates and years away from a major oil boom. However, smugglers and other criminals saw it as an opportunity to make money from the average Indian’s desire to hoard gold.

Indranil Mukherjee/AFP

The modus operandi was quite simple. Smugglers would send young men to the Gulf on ostensible business trips with wads of rupee notes. There, gold would be purchased with the smuggled rupees and brought back to India. This would inevitably create an excess of Indian currency in the Gulf, leading to the extra rupees being sold back to the RBI, which lost valuable foreign exchange.

As is the case now, gold smugglers were very innovative in their methods to bypass Indian Customs officials. A well-known and often-repeated anecdote among the first generation of Malayali migrant workers in the Gulf tells the story of a man who was asked by an acquaintance to take a clock back to Bombay from a Gulf country. The unsuspecting young man carried the clock, inside which gold biscuits were neatly hidden, and was arrested and prosecuted in India.

“While the smuggling had been a problem for many years, in 1957 and 1958 the problem rose to alarming proportions and took a large toll on India’s reserves of foreign exchange,” Peter Symes, an Australian researcher and expert on paper money, wrote in a 1999 article.

A New York Times report from April 1959 stated that India had to pay the equivalent of $92.4 million in sterling for rupees presented through traders and banks in the Persian Gulf in 1957 alone. The report estimated that $69.3 million went to the region from India in exchange for smuggled gold in the first nine months of 1957.

Launch of the Gulf rupee

By 1959, India faced a major foreign exchange crisis thanks to the thriving gold smuggling business, losing hundreds of millions in sterling.

“To obviate or at least mitigate malpractices, which such an arrangement could give rise to, a separate series of notes exclusively for circulation in the Gulf (Kuwait, Bahrain, Qatar, and the Trucial States) were issued by the Indian Government and the Reserve Bank of India in the 1950s,” according to the RBI.

On May 1, 1959, Indian President Rajendra Prasad gave his assent for the Reserve Bank of India (Amendment) Act 1959, after it was passed by both houses of the Parliament. The law allowed the Indian government and RBI to issue special notes that were intended to be circulated only in the Gulf region. This currency, which had the same value as the Indian rupee, was known as the Gulf rupee or External rupee.

One Gulf Rupee. Wikimedia Commons [CC0 1.0]

“The Ministry of Finance drew up the reform after months of secret consultations and after obtaining the approval of the British Government, the Bank of England and the rulers of the sheikhdoms,” the New York Times reported after the Lok Sabha passed the bill.

Shrouded in secrecy, as was the case with the 2016 demonetisation in India, few members of the ruling party knew that this reform was being planned. The task was entrusted to Morarji Desai, then the minister of finance. The bill was introduced in the Lok Sabha on April 27, 1959.

“The introduction of the amendment to the Reserve Bank of India Act, to the Indian parliament, caused some consternation to the members of parliament, as it was proposed without any warning,” Symes wrote. “The Government of India had tried to introduce the amendment with a degree of haste so that they could reduce the window of opportunity for people who might take advantage of the proposed issue of special notes and increase the smuggling activity in the immediate future. However, following a delay of a day or so in which the opposition was allowed to review the measures, the amendment to the Act was passed with little difficulty.”

The Gulf rupee notes retained the contemporary design but were different in colour and carried the prefix “Z”. The notes were issued one, ten and hundred denominations and were redeemable only at the Bombay office of issue.

Holders of regular Indian currency notes in the Gulf were given six weeks to exchange them for the new currency or sterling. The transition to the new notes was fairly smooth and regular rupee notes were no longer accepted in the Gulf. Innovative gold smugglers, however, found other ways to satiate the Indian appetite for the precious metal. At the time of the passing of the bill, Indians were believed to be privately hoarding up to $2 billion in gold.

Haj notes

Indian pilgrims also took rupee notes when they went on the Haj pilgrimage, where they could freely exchange them for Saudi riyals. The Indian government had initially allowed Saudi banks and traders to exchange these rupees for sterling in Bombay, but fears persisted over smugglers using this route to buy foreign exchange.

In response to this threat, the Indian government began to issue special Haj rupee notes for pilgrims going to Mecca and Medina. The notes in ten and hundred denomination had the word HAJ inscribed on the obverse. Another way to distinguish them from normal rupee notes was the serial number that was prefixed with the letters “HA”.

The Haj rupee was exchanged at par to the Saudi riyal in the early 1960s. (A Saudi riyal is now worth almost 20 rupees.) Haji Siddique Mohammed, a 79-year old retired railway employee from Mangalore, remembers using the Haj rupee during a pilgrimage in 1963. “We got the Haj rupee from the Haj Committee of India, before boarding the ship for Jeddah,” Mohammed told this writer. “I managed to preserve a couple of notes, but they were unfortunately lost when I moved out of my official quarters after retirement.”

Devaluation of the rupee

The special notes for the Haj and the Gulf stayed in circulation until the mid-1960s but were slowly being phased out in some countries. This was at a time when Indian economic growth was slow, and the Gulf nations were in the early stages of a boom. Kuwait introduced its own currency as early as 1961 and a few years later, Bahrain followed suit.

The end of the Gulf rupee was, however, precipitated by an important development in India. In June 1966, Indian Finance Minister Sachindra Chaudhuri, with the blessings of Indira Gandhi, announced a devaluation of the rupee. Overnight the exchange rate of the dollar rose to Rs 7.5 from Rs 4.76. Although this decision surprised many, rumours were doing the rounds for several months.

A World Bank team that had visited India in 1965 proposed the idea of devaluation of the rupee to get the economy moving. Media reports of the time suggested that devaluation was one of the West’s preconditions for increasing aid for India’s fourth five-year plan. The decision prompted members of the opposition and the business community to accuse the government of bowing to pressure from the United States and multilateral lending institutions.

The devaluation created a stir in West Asia, with some rulers asking the British government to intervene, since the original arrangement to rely on the Indian rupee was put in place by the British. Such requests were turned down.

Qatar and Dubai withdrew the Gulf rupee from circulation within months of the devaluation of the Indian rupee, with both states temporarily using Saudi riyals. They would subsequently use Qatar and Dubai riyals, which had the same value of the pre-devaluation Indian rupee. Most of the Trucial States followed suit, but Abu Dhabi decided to use the Bahraini dinar, which had an exchange rate of 10 Gulf rupees.

A bank in Al Ain, southeast of Dubai. Dubai withdrew the Gulf rupee from circulation within months of the devaluation of the Indian rupee in 1966. Credit: WAM/AFP

“Consequently, following the introduction of the Qatar and Dubai riyal, the Qatar and Dubai Currency Board made a claim to the Reserve Bank of India for the total amount of sterling originally sent to cover the rupees held by Qatar and Dubai, and not the lesser value of what the Gulf rupees were actually worth,” Symes wrote.

The RBI would deal with each of the Gulf states separately when it came to the settlement of the sterling reserves that it held.

The RBI-issued currency survived in Oman until 1970 and was mostly accepted as legal tender only in the country’s ports. In May 1970, the Saidi rial (named in honour of the House of Al Said) was introduced as a currency in Oman and replaced the Gulf rupee. The new currency was exchanged at par with the sterling. Gulf rupees were exchanged for 21 rupees to the riyal and were redeemed in Bombay by the Omani government. The country’s present currency the Omani rial became the legal tender in 1972.

The Haj and Gulf rupee notes were withdrawn by the RBI in the early 1970s and are now a much-sought after collector’s item. Auctions conducted by Spink & Son have managed to get bids from 120 pounds and VAT for a 10 Gulf rupee note to 44,000 pounds for a 100 Haj rupee note. Collectors and enthusiasts warn of several fake notes being sold for high prices on different e-commerce websites.

Five decades after the Gulf and Haj rupees have ceased to exist, India continues to enjoy strong business and cultural links with Persian Gulf states but the idea of the country getting back the economic clout that newly-independent India enjoyed in West Asia does not look realistic.

Ajay Kamalakaran is a writer and independent journalist, based in Mumbai. He is a Kalpalata Fellow for History & Heritage Writings for 2021.

(Source: Scroll)

Banknotes may be spreading coronavirus, warns WHO

The World Health Organisation (WHO) has advised people to use contactless technology instead of cash as banknotes may be spreading coronavirus.

The infectious COVID-19 virus could be carried on the surface of banknotes for several days, the WHO warned on Monday night.

To stop the spread of the disease, people should use contactless payments where possible and wash their hands after handling cash, a WHO spokesman said.

The Bank of England also recognised that banknotes “can carry bacteria or viruses” and encouraged frequent hand washing.

Banks in China began disinfecting and isolating used banknotes last month as part of efforts to stem the spread of coronavirus. (Feature China/Barcroft Media via Getty Images)

Last month banks in China and Korea began disinfecting and isolating used banknotes as part of efforts to stem the spread of the deadly virus.

Ultraviolet light or high temperature is being used to disinfect and sterilise banknotes, before the cash is sealed and stored for up to 14 days before being recirculated, China’s central bank said at a press conference.

A Bank of England source said there were no plans to do the same in the UK.

A Bank of England spokesman told the Telegraph: “Like any other surface that large numbers of people come into contact with, notes can carry bacteria or viruses.

“However, the risk posed by handling a polymer note is no greater than touching any other common surface, such as handrails, doorknobs or credit cards.”

Coronavirus can be spread through contaminated objects as well as droplets and direct contact with infected patients, the WHO said.

“We know that money changes hands frequently and can pick up all sorts of bacteria and viruses,” a spokesman told the Telegraph.

“We would advise people to wash their hands after handling banknotes, and avoid touching their face.

“When possible it would also be advisable to use contactless payments to reduce the risk of transmission.”

It is not yet known how long the coronavirus can survive outside the human body.

It has been suggested that human coronaviruses can remain infectious on contaminated objects for as long as nine days at room temperature in an analysis of 22 earlier studies of similar viruses, including Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS) published online this month in the Journal of Hospital Infection.

However, common disinfectants can swiftly remove them, and they may also be destroyed by high temperatures, the authors wrote. It is not yet clear whether the new coronavirus also behaves in this way.

(Source: Yahoo)

New face of the Bank of England's £50 note is revealed as Alan Turing

Computer pioneer and codebreaker Alan Turing will feature on the new design of the Bank of England's £50 note.

He is celebrated for his code-cracking work that proved vital to the Allies in World War Two.

The £50 note will be the last of the Bank of England collection to switch from paper to polymer when it enters circulation by the end of 2021.

The note was once described as the "currency of corrupt elites" and is the least used in daily transactions.

BANK OF ENGLAND

However, there are still 344 million £50 notes in circulation, with a combined value of £17.2bn, according to the Bank of England's banknote circulation figures.

"Alan Turing was an outstanding mathematician whose work has had an enormous impact on how we live today," said Bank of England governor Mark Carney.

"As the father of computer science and artificial intelligence, as well as a war hero, Alan Turing's contributions were far-ranging and path breaking. Turing is a giant on whose shoulders so many now stand."

Why was Turing chosen?
The work of Alan Turing, who was educated in Sherborne, Dorset, helped accelerate Allied efforts to read German Naval messages enciphered with the Enigma machine.

Less celebrated is the pivotal role he played in the development of early computers, first at the National Physical Laboratory and later at the University of Manchester.

In 2013, he was given a posthumous royal pardon for his 1952 conviction for gross indecency following which he was chemically castrated. He had been arrested after having an affair with a 19-year-old Manchester man.

The Bank said his legacy continued to have an impact on science and society today.

Yet for decades, the idea of Turing being featured on a banknote seemed impossible. This will be seen as an attempt to signal how much has changed in society following the long, ultimately successful campaign to pardon Turing of his 1952 conviction - under contemporary laws - for having a homosexual relationship.

His work helped cement the concept of the algorithm - the set of instructions used to perform computations - that are at the heart of our relationship with computers today. He was also a pioneer in the field of artificial intelligence: one of his best known achievements in this field is the Turing Test, which aims to measure whether a machine is "intelligent".

Rosalind Franklin, Stephen Hawking and Ada Lovelace all appeared on the shortlist

The shortlisted characters, or pairs of characters, considered were: Mary Anning, Paul Dirac, Rosalind Franklin, William Herschel and Caroline Herschel, Dorothy Hodgkin, Ada Lovelace and Charles Babbage, Stephen Hawking, James Clerk Maxwell, Srinivasa Ramanujan, Ernest Rutherford, Frederick Sanger and Alan Turing.

The debate over representation on the Bank's notes could resurface after this decision.

Jane Austen will continue to be the only woman, apart from the Queen, whose image will be seen on the four notes.

There was also a campaign calling for a historic figure from a black and ethnic minority background (BAME) to feature on the new £50 note.

In response to Maidstone MP Helen Grant, who raised the issue in Parliament, the governor said: "The Bank will properly consider all protected characteristics, and seek to represent on its banknotes characters reflecting the diversity of British society, its culture and its values."

How will the banknote change?
Steam engine pioneers James Watt and Matthew Boulton appear on the current £50 note, issued in 2011.

The new £50 Turing note will enter circulation by the end of 2021, Mr Carney announced at the Science and Industry Museum in Manchester. It will feature:

• A photo of Turing taken in 1951 by Elliott and Fry, and part of the National Portrait Gallery's collection
• A table and mathematical formulae from Turing's 1936 paper "On Computable Numbers, with an application to the Entscheidungsproblem" - foundational for computer science
• The Automatic Computing Engine (ACE) Pilot Machine - the trial model of Turing's design and one of the first electronic stored-program digital computers
• Technical drawings for the British Bombe, the machine specified by Turing and one of the primary tools used to break Enigma-enciphered messages
• A quote from Alan Turing, given in an interview to The Times newspaper on 11 June 1949: "This is only a foretaste of what is to come, and only the shadow of what is going to be"
• His signature from the visitor's book at Bletchley Park in 1947
• Ticker tape depicting Alan Turing's birth date (23 June 1912) in binary code. The concept of a machine fed by binary tape featured in Turing's 1936 paper.

“I couldn’t think of a more deserving candidate, he was an extraordinary human being” #BenedictCumberbatch talks to @BBCPM about the Bank of England putting #AlanTuring on the £50 bank notehttps://t.co/qD5gaW8RPi pic.twitter.com/GWszDS1EXR

— BBCPM (@BBCPM) 15 July 2019

Current Bank of England £5 and £10 notes are plastic - which the Bank says are more durable, secure and harder to forge. The next version of the £20, to enter circulation next year, will also be made of the same polymer.

So, the £50 note will be the last of the Bank's collection to change.

Why do we even have a £50 note?
In recent years, there have been doubts that the £50 note would continue to exist at all.

Fears that the largest denomination note was widely used by criminals and rarely for ordinary purchases prompted a government-led discussion on whether to abolish it.

The £50 note was described by Peter Sands, former chief executive of Standard Chartered bank, as the "currency of corrupt elites, of crime of all sorts and of tax evasion".

There has also been considerable discussion over the future of cash in the UK, as cards and digital payments accelerate and the use of notes and coins declines.

Nevertheless, in October, ministers announced plans for a new version of the note, to be printed in the UK.

What about other banknotes?
Polymer £5 and £10 notes are already in circulation, while a £20 design will be issued in 2020.

Jane Austen was chosen to appear on the plastic £10 note after a campaign to represent women other than the Queen on English notes.

In 2015, a total of 30,000 people nominated 590 famous visual artists for the £20 note, before JMW Turner was selected with the help of focus groups. He will replace economist Adam Smith on the note in 2020.

Sir Winston Churchill appears on the polymer £5 note.

A host of different people have appeared on banknotes issued in Scotland and Northern Ireland. Ulster Bank's vertical £5 and £10 notes entered circulation in Northern Ireland in February.

Analysis: Paul Rincon, BBC News website science editor
Alan Turing played an absolutely crucial role in Allied victories through his codebreaking work. He is also considered a towering figure in the development of computing.

BBC copyrigh

Alan Turing
1912 – 1954
1912 Alan Mathison Turing was born in West London
1936 Produced “On Computable Numbers”, aged 24
1952 Convicted of gross indecency for his relationship with a man
2013 Received royal pardon for the conviction
Source: BBC

Yet for decades, the idea of Turing being featured on a banknote seemed impossible. This will be seen as an attempt to signal how much has changed in society following the long, ultimately successful campaign to pardon Turing of his 1952 conviction - under contemporary laws - for having a homosexual relationship.

His work helped cement the concept of the algorithm - the set of instructions used to perform computations - that are at the heart of our relationship with computers today. He was also a pioneer in the field of artificial intelligence: one of his best known achievements in this field is the Turing Test, which aims to measure whether a machine is "intelligent".

In 4 years, banks fined you more than what Vijay Mallya and Nirav Modi owe them

Banks in India have earned at least Rs 10,391.43 crore by charging you for just two things--failure to maintain minimum balance in saving accounts and carrying out more than the permitted number of free ATM transactions in a month.

Of course, you have heard the name Vijay Mallya. The liquor baron who once had a majority stake in United Beverages, the face of Kingfisher Airline and Royal Challengers Bangalore, and a host of other things? Aaah! You remember. Good.

Vijay Mallya owes approximately Rs 9,000 crore to various Indian banks. He defrauded them over years and now is in the United Kingdom. India says it wants him to be deported and efforts are on.

Another name that you must have heard of is Nirav Modi. The diamond businessman who defrauded Indian banks to the tune of more than Rs 11,300 crore?

But this is not an article about India’s fugitive billionaires. Forget them for a while. This article is about you and your money.

In less than four years (April 2015 to September 2018), banks in India have earned at least Rs 10,391.43 crore by charging you for just two things--failure to maintain minimum balance in saving accounts and carrying out more than the permitted number of free ATM transactions in a month.

This amount is more than what Vijay Mallya owes, and is 92 per cent of the amount owed by Nirav Modi. Hold on and take a breath because this amount is just the one collected by public sector banks. It doesn't include the earnings made by private banks by collecting fines.

(Penalty for non-maintenance of minimum balance is much higher in private banks as compared to public-sector banks. For example, between 2015-16 and 2017-18, India’s three private banks Axis Bank, HDFC Bank and ICICI Bank earned Rs 4,054.77 crore by fining their customers for not maintaining minimum balance in their savings account. More on this later.)

Banks have been defending themselves by arguing that they are providing services to people and like any other service provider, they too have a right to charge for services rendered by them. (Photo: Reuters)

In less than four years (April 2015 to September 2018), banks in India have earned at least Rs 10,391.43 crore by charging you for just two things--failure to maintain minimum balance in saving accounts and carrying out more than the permitted number of free ATM transactions in a month.
This information was shared by the Union finance ministry in the Lok Sabha on December 21 in response to a written question submitted by Dibyendu Adhikari, a Trinamool Congress MP.

But why should we compare money owed by frauds with the money that banks have earned legally? Correct. We shouldn't and we aren't. This is just to give you an idea of the enormity of the amount that banks earn by charging customers for just two of their many services.

To better appreciate the size of this amount, let’s take a different example. The amount earned by banks by collecting these two fines is more than the Rs 10,000 crore that the central government approved on Friday (December 28) for India's first man mission to space--Gaganyaan.

Reading the big numbers
Okay. So since now you know that we are talking about big (actually very big) numbers, let’s discuss them in detail.

The central government was asked whether public sector banks levy any charges/fines on saving accounts that do not maintain minimum balance or/and exceed the number of free ATM transactions allowed by banks in a month.

ATM transactions include both financial (withdrawal and transfer) and non-financial (mini statement, pin change, balance inquiry etc).
In its reply, the finance ministry provided data of how much each public sector bank has earned since April 2015 till September 2018 by collecting fines for these two defaults.

Calculating the earnings made by each bank, we find that public sector banks have earned Rs 6,246.44 crore by just charging customers for their failure to maintain minimum balance in their savings account.

Meanwhile, the amount collected as fine for making extra ATM transactions in this period was Rs 4,144.99 crore.

FINE COLLECTED BY TOP 5 PUBLIC BANKS
Bank Amount
State Bank of India Rs 4,447.75 crore
Punjab National Bank Rs 815.94 crore
Central Bank of India Rs 551.49 crore
Bank of Baroda Rs 510.34 crore
Canara Bank Rs 503.35 crore
Source: Lok Sabha

The Punjab and Sindh Bank is the only public sector bank that does not levy any fine for non-maintenance of minimum balance in savings accounts.

The State Bank of India (SBI), which has the largest network in the country and is India’s biggest lender, earned the most (Rs 4,447.75 crore i.e. 43 per cent of the total amount earned by all public banks) by levying fines on these two aspects, the government’s reply revealed.

When it comes to private banks, another reply in the Lok Sabha revealed that between April 2015 and March 2018, three private banks--Axis Bank, HDFC Bank and ICICI Bank--earned Rs 4,054.77 crore by fining customers for non-maintenance of minimum balance.

(We did not include the earnings made by private banks in our overall figure because data of fine collected by them for non-maintenance of minimum balance in the current financial year (up till September) was not available, unlike data for public banks. Besides, the Lok Sabha reply did not include the earnings these banks made by fining customers for extra ATM transactions in past four years.)

The State Bank of India (SBI), which has the largest network in the country and is India’s biggest lender, earned the most (Rs 4,447.75 crore i.e. 43 per cent of the total amount earned by all public banks) by levying fines on these two aspects
However, an analysis of the two replies of the government in the Lok Sabha shows that the earnings made by the three private banks by fining customers for non-maintenance of minimum balance is more than the collective earnings of 20 public sector banks (excluding SBI).

For instance, between April 2015 and March 2018, the three private banks earned Rs 4,054.77 crore by collecting fines for non-maintenance of minimum balance.

In the same period, public sector banks (excluding SBI) earned Rs 2,823.42 crore. For SBI, the earning was Rs 2,433.87 crore in this period.

Private banks' earnings from fine for non-maintenance of min balance
Bank Amount
Axis Bank Rs 1,300.44 crore
HDFC Bank Rs 1,757.90 crore
ICICI Bank Rs 996.43 crore
Total Rs 4054.77 crore
Source: Lok Sabha

What are RBI’s guidelines
This is not the first time that banks have been criticised for levying fines on customers for failure to maintain minimum balance or for making extra ATM transactions.

Banks have defended themselves by arguing that they are providing services to people and like any other service provider, they too have a right to charge for services rendered by them.

Speaking to news agency Press Trust of India (PTI) on December 21, 2018 SBI’s Managing Director PK Gupta justified the charges levied by banks. He said banks have invested heavily in technological upgradation of system and that this upgradation provides safe and secure banking facilities in the country.

"With substantial investment in infrastructure and technology, it becomes imperative for the bank to recover at least a part of the cost," he was quoted as saying.

As an advice for customers, he said the bank requests them to use digital channels as much as possible "since ATM operations are becoming costlier day-by-day".

The Reserve Bank of India’s (RBI) circulars/guidelines empower banks to self-determine the minimum balance that savings account should maintain and how much fine should be collected for non-maintenance.

With substantial investment in infrastructure and technology, it becomes imperative for the bank to recover at least a part of the cost
- PK Gupta, Managing Director, SBI

In regard to ATM transactions, the RBI guidelines say banks should allow their customers to carry out five free transactions from ATMs of home banks every month. For six metropolitan cities--New Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru--the RBI has allowed three free transactions from ATMs of other banks, in addition to the five transactions from ATMs of home bank, every month.

ATM transactions include both financial (withdrawal and transfer) and non-financial (mini statement, pin change, balance inquiry etc).

The RBI has exempted basic saving bank deposits (BSBD) accounts and accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) from the minimum balance clause. However, these accounts can be fined for extra ATM transactions.

(BSBD accounts and PMJDY accounts are saving accounts that have a cap on the amount that can be transacted from them. They are aimed at providing banking services to low-income groups.)

As already mentioned, the RBI has left it to the banks to decide what will be the minimum balance that a normal savings account should maintain, and also what should be the fine for non-maintenance.

RBI’s guidelines, as per the government’s reply in Parliament, only say that the fine should be "reasonable" and "not out of line with the average cost of providing these services".

For ATM transactions, the RBI leaves it to the banks to decide how much they want to charge for every extra transaction, with the condition that this fine can’t be more than Rs 20 per transaction.

Charges levied by some banks
Bank: Minimum Balance Required- Fine for minimum balance- Fine for extra ATM transactions
SBI Rs 1,000-Rs 3,000 Rs 5-Rs 15 Rs 20
BoB Rs 500-Rs 1,000 Rs 100-Rs 200  Rs 20 (for financial) Rs 10 (for non-financial)
HDFC Rs 2,500-Rs 10,000 Rs 150-Rs 600 Rs 20 (for financial) Rs 8.50 (for non financial)
ICICI Rs 1,000-Rs 10,000 Gramin accounts: 5% of shortfall of min balance
Other accounts: Rs 100+5% of shortfall of min balance Rs 20 (for financial) Rs 8.50 (for non financial)

How rational is the fine collected by banks
Fines for non-maintenance of minimum amount and extra ATM transactions are just two of the many types of charges that banks levy on customers. Other charges include annual ATM maintenance fee, fee for RTGS, fee for NTFS, free SMS alert, internet banking fee, among others.

Here too, there is no fixed rate for these charges, and they vary from one bank to another.

With a majority of public sector banks running in loss due to piles of non-performing assets (NPA) accumulated over years, are banks trying to find a way out to at least meet their operational costs by charging ordinary customers?

As per another written reply of the central government in the Lok Sabha, the non-performing assets of all public sector banks was worth Rs 9,62,621 crore as on March 31, 2018.

Between March 31, 2014 and March 31, 2018, the non-performing assets of public sector banks saw an increase of 74 per cent from Rs 2,51,054 crore to Rs 9,62,621 crore.

Infographics: Mukesh Rawat/IndiaToday

So, instead of getting their acts in place to find ways to reduce their NPA and ensure that big corporate repay the loan taken by them, are banks fleecing money from ordinary people by charging them for things like non-maintenance of minimum balance and carrying our extra ATM transactions to withdraw their own hard-earned money?

Between March 31, 2014 and March 31, 2018, the non-performing assets of public-sector banks saw an increase of 74 per cent from Rs 2,51,054 crore to Rs 9,62,621 crore.

It’s not rocket science for banks to understand and empathise that the accounts that are not maintaining the minimum amount are not owned by millionaires, but by very ordinary people, many of whom would be positioned in the economy at a place where maintaining the minimum balance is a far cry.The banks are well within their rights to levy fines because the law provides it. But it remains an open-ended question as to how rational and justifiable these charges levied on common people are when juxtaposed to heaps of NPAs which the banks have miserably failed to address.

(Source: India Today)

Bitcoin trading prohibited in Qatar: Central Bank

In a statement sent to all banks operating in the country, Qatar Central Bank said that trading in Bitcoin is not allowed in Qatar and penalties will be levied if the circular is violated.

Active trading in Bitcoin have been noticed in some countries, but it is an illegal currency because there is no commitment from any central bank or a government in the world to exchange their value for money issued and cleared for payment for the goods traded globally or for gold, the statement said.

“This cryptocurrency is highly volatile and can be used for financial crimes and electronic hacking as well as risk loss of value because there are no guarantors or assets,” it added.

Representation of the Bitcoin virtual currency standing on the PC motherboard is seen in this illustration picture, February 3, 2018. REUTERS/Dado Ruvic/Illustration

The central bank explained that in order to ensure the safety of the financial and banking system, all banks operating in the country are not allowed to deal in any way with this currency or exchange it with any other, or open accounts to deal with it or send or receive any money transfers for the purpose of buying or selling this currency.

The central bank will impose penalties in accordance with the provisions of the Qatar Central Bank law and regulation of financial institutions issued by Law No. (13) for the year 2012 in the event of any violation of this circular.

Recently Banks in Britain and the United States have banned the use of credit cards to buy Bitcoin and other "cryptocurrencies", fearing a plunge in their value will leave customers unable to repay their debts.

(Source: The Peninsula)

Indian funds in Swiss banks rise by 50%, Pakistan's falls by 21%

Indians have reasserted their love for Swiss banks. Despite NDA government's tall claims of taking decisive action against parallel economy, the money parked by Indians in Swiss banks rose by over 50% to Rs 7,000 crore in 2017.

This reverses a three-year downward trend which the Centre has been presenting as a result of its vigorous clampdown on suspected black money stashed abroad.

The Indian case stands out. As against the 50 per cent rise in funds from India, the total funds held by all foreign clients of Swiss banks rose by just 3 per cent to Rs 100 lakh crore in 2017.

Interestingly, while the money stashed by Indians in Swiss banks rose, its neighbour Pakistan's fell by over 21 per cent to a record low of Rs 7,700 crore. However, Pakistani nationals still have more money stashed in Swiss bank than Indians.

This could well be a setback for BJP government's attempt to keep black money under check.

Swiss banks are most preferred by Indians. This was revealed by the official annual data released on June 28 by Swiss National Bank (SNB) - the central banking authority of Switzerland.

A retired senior finance ministry official, who was a part the note ban exercise and signing of treaties for flow of information to India from tax havens said, "I am surprised. This can happen only if the number of people who have honest money have started depositing overseas using the liberalised rules by RBI, or this can be a case of misuse by people who are desperate."

A finance ministry official said, "I-T department has information about this. Its teams are scrutinising the data which is flowing over a period. Right now, the ministry can't say how much of this is black money or how much of it is accounted for."

In 2016, deposits by Indians had fallen by 25 per cent. The drop was marking the biggest ever annual plunge to approximately Rs 4,500 crore.

The SNB data shows that funds held directly by Indians in 2017 rose to Rs 6,891 crore. Of this, Rs 3200 crore was in the form of customer deposits, Rs 1050 crore through other banks and Rs 2640 crore A's "other liabilities including securities. Nearly Rs 112 crore was held through fiduciaries or fund managers.

What's alarming officials is the fact that the funds under all categories barring fiduciaries has gone up exponentially reversing trends for the last three years.

No official agreed to comment on the SNB data or queries raised by the Opposition.

If deposits in Swiss banks have witnessed a huge rise then what about the tax havens where information is difficult to access due to client protection rules?

The latest data from Zurich-based SNB came a few months after the new framework was put in place to deliver automatic exchange of information between Switzerland and India to check black money.

Switzerland has shed its past reluctance of sharing client details on evidence of misappropriation or illegality provided by the Indian government.

(Source: India Today)

All 14 types of Rs 10 coin valid, legal tender: RBI

RBI has also asked banks to accept coins for transactions and exchange at all their branches.

All the 14 designs of Rs 10 coin are valid and legal tender for transactions, the Reserve Bank said today amid reluctance by certain traders to accept the coins.

"It has come to the notice of the Reserve Bank that in certain places there is reluctance on part of traders and members of public to accept Rs 10 coins due to suspicion about their genuineness," the RBI said while reiterating legal tender status of the coins of different designs.

In a statement, the central bank clarified that it puts into circulation the coins minted by government mints. These coins, it further said, have distinctive features to reflect various themes of economic, social and cultural values and are introduced from time to time.

"So far the Reserve Bank has issued Rs 10 coin in 14 designs... All these coins are legal tender and can be accepted for transactions," the RBI said.

It has also asked banks to accept coins for transactions and exchange at all their branches. 

(Source: DC)

Your Aadhaar details on sale for Rs 2-5: How can govt make sure your data is safe?

Nandan Nilekani's trailblazing biometric ID system, apparently modelled on first FBI director J Edgar Hoover's massive central database of fingerprints, is in spotlight after reports of a cyber attack which leaked Aadhaar data. A report by The Tribune had claimed that one of its reporters paid just Rs 500 to an 'online agent' to access names, addresses, PINs, photos, phone numbers and emails of more than 1 million numbers.

However, an India Today investigation has revealed that the Aadhaar data breach racket is not merely online, but could be widespread with agents at several enrolment agencies willing to part with demographic records collected from Aadhaar applicants for Rs 2-5.

Enrolment agencies are entities hired by the Registrars for enrolment of residents during which demographic and biometric data are collected as per UIDAI enrolment process, according to uidai.gov.in.

One such enrolment agency is Alankit Assignments Limited, located in Faridabad. "You can see for yourself," said Alankit's branch head Ishpal Singh when asked is this Aadhar data as he planked an entire file of 250 applicants on his desk.

YOUR CHOICE- SCAN THROUGH OR COPY DATA
"I can give you data of 15,000 applicants for Rs 30,000," a brazen Singh, who is the branch head of Alankit, told India Today reporters, who posed as businessmen seeking to expand their database of potential customers. He was ready to provide an applicant's name, address, birth date, mobile numbers and email for merely Rs 2.

Subsequently, Singh advised the India Today reporters to copy down every bit of information from his dossiers right there. "I will give you a bundle of 250 forms (application acknowledgements). I have records of 50,000 applicants. You can note down all the data."

The probe shows how Section 28 of the Aadhaar Act, which states that the UIDAI must ensure the security and confidentiality of identity information and authentication records, is brazenly flouted. "The Authority shall adopt and implement appropriate technical and organisational security measures, and ensure the same are imposed through agreements/arrangements with its agents, consultants, advisors or other persons," Section 28 further states.

PRIVACY GONE FOR A TOSS
Nilekani, the architect of Aadhaar, had vouched for its security last April. "It's a very, very secure system. The level of encryption that Aadhaar has is way above any other system today, including in the private sector. Plus, security keeps getting enhanced," he had said.

Another enrolment centre at Indirapuram, Ghaziabad, was willing to sell data of 4-5 lakh applicants. Senior official Ashish Gupta offered the database not only from this facility, but also from three others under his command in Delhi.

"I'll get the data on an Excel sheet," Gupta replied when asked if he could offer information about all the applicants in Indirapuram. He is ready to provide all this data for Rs3-5 per applicant.

An Aadhaar enrolment centre at Sector 10, Noida, was no different with the main agent, Sonu, demanding Rs 4-5 per applicant. "I have made 40,000 Aadhaar cards so far." He offered PDF copies of acknowledgements of applicant's information.

These agents are operating with blatant disregard for the Aadhaar Act. Section 37 of the Act says "intentional disclosure or dissemination of identity information, to any person not authorised under the Aadhaar Act, or in violation of any agreement entered into under the Act, will be punishable with imprisonment up to three years or a fine up to ten thousand rupees (in case of an individual), and fine up to one lakh rupees (in case of a company)".

WHAT UIDAI CLAIMES
Meanwhile, the UIDAI has reiterated that Aadhaar data cannot be hacked.

A day after The Tribune reported breach of the unique ID records, the UIDAI insisted the system is fully equipped to deal with any leaks.

In a statement, the authority emphasised "there has not been any Aadhaar data breach. The Aadhaar data, including biometric information, is fully safe and secure."

Claims of bypassing or duping the Aadhaar enrolment system, it said, are totally unfounded. "Aadhaar data is fully safe and secure and has robust uncompromised security. The UIDAI Data Centres are infrastructure of critical importance and is protected accordingly with high technology conforming to the best standards of security and also by legal provisions."

But reports of data leaks triggered a strong political reaction from opposition leaders.

In a tweet, communist leader Sitaram Yechury demanded the government roll back its order to link Aadhaar with bank accounts.

The perils of making Aadhaar mandatory and linking it to bank accounts, as insisted upon by Modi govt, are visible here. Do we need more proof to stop this madness? https://t.co/9OEbitCmDO

— Sitaram Yechury (@SitaramYechury) January 4, 2018

Congress leader Randeep Surjewala described the reports of data theft as a "mockery" of the citizens' right to privacy.

‘AADHAR’ data breached yet again!

As every citizen’s personal information is exposed to hackers everyday & ‘Right to Privacy’ is mocked and flouted with impunity, Modi Govt remains immune.

Is anyone listening?https://t.co/UDSfOlSWv9

— Randeep S Surjewala (@rssurjewala) January 4, 2018

(Source: India Today)

ICICI officials accused of tricking hundreds into buying insurance instead of FD schemes

Rajasthan’s state police special operations group is investigating multiple company officials for misleading customers and violating IRDAI norms.

The Rajasthan police’s special operations group (SOG) is investigating multiple ICICI bank and ICICI Prudential officials for allegedly duping hundreds of unsuspecting consumers into buying insurance policies whose premiums they could barely afford.

When Sohandas, a 75-year-old farmer from Udaipur, sold the only piece of land he owned, he hoped the money would help him and his 65-year-old wife with financial security during old age. After building a small house, he deposited the rest of his money (Rs 7,50,000) in a fixed deposit at ICICI bank’s Udaipur branch.

“Nine months later, I started receiving calls from Mumbai asking me to deposit another Rs 7,50,000, failing which I’d lose my original deposit. When I showed the bank documents to a lawyer, I was told it was an insurance policy, which required me to deposit the same amount every year”.

“I don’t know what to do now,” he said. “Both my wife and I are too old to find labour jobs. We have medical bills of Rs 5-7,000 every month. We don’t have 7.5 lakh rupees to deposit every year”.

Sohandas, however, is not alone. There are hundreds like him – a labourer who was relieved of the insurance money she received upon her husband’s death; a government employee whose gratuity melted away; a poor farmer whose agricultural loan was appropriated.

The victims include farmers, labourers and senior citizens from rural areas of southern Rajasthan, including beneficiaries of central government schemes like the Kisan Credit Card and MGNREGA, all of who were duped by officials from ICICI bank into buying insurance policies with huge recurring annual premiums, the police says.

Tulsiram And Pyaribai Regar (right), who were customers of ICICI Prudential Life Insurance. Credit: Special Arrangement.

In a preliminary probe, the special operations group (SOG) of the Rajasthan police established the existence of this  fraud following a complaint by a whistleblower, Nitin Balchandani, an ex-employee of ICICI Prudential.

Subsequently, in November, the SOG launched a full-fledged investigation, booking company officials for cheating, forging documents, criminal conspiracy and criminal breach of trust.

An FIR was registered in the same month under sections 420 (fraud), 467, 468, 471 (forgery), 406 (criminal breach of trust) and 120B (criminal conspiracy) of the Indian Penal Code. The FIR, a copy of which The Wire has accessed, specifically names Rohit Saini (Regional Manager, ICICI Prudential, Udaipur), Kamlesh Mehta (Financial Services Consultant, ICICI Prudential Udaipur), Deepak Agarwal (Sales officer, ICICI bank Udaipur) and Satish Kumar Dangi (ICICI employee).

According to the SOG investigation, the bank and its officials misled consumers and violated regulatory norms issued by the Insurance Regulatory and Development Authority of India (IRDAI).

“These banks and insurance firms have unrealistic monthly targets. In this case, whenever they gave out loans to farmers or other vulnerable applicants, they put a substantial part of the money in insurance policies with recurring premium. In some cases, they put the entire loan amount in such policies. The farmer has no idea. It’s a comprehensive fraud,” inspector general of police (SOG) Dinesh M.N. told The Wire.

Bholi Bai, a wage labourer under MGNREGA, wanted to put the insurance money she received at her husband’s death into a fixed deposit. The officials at ICICI bank’s Kelwa branch sold her an insurance policy instead.

Bholi, a MGNREGA labourer earning about Rs 3000 a month, thought her money was safe in a FD since she believed “bank mein kuch galat nahin hota (the bank could do no wrong)”.

Bholi Bai, a daily wage labourer. Credit: Special Arrangement.

“I got insurance of Rs 1,00,000 at my husband’s death. I wanted an FD but the bank put my money into an insurance policy. I realised it months later when my mamaji (uncle) saw the bank documents. When I approached them, they told me I had to deposit Rs 50,000 every year only then I would get my money back,” she says.

The Wire sent detailed questionnaires to both companies asking for their comments on the pre-investigation and subsequent FIR. Both companies, however, refused to respond despite repeated emails and phone calls to their officials as well as Adfactors PR, the agency handling their public relations portfolio.

The modus operandi
ICICI and ICICI Prudential officials in the state allegedly used their large database of account holders in rural areas to target unsuspecting consumers, especially farmers, labourers and senior citizens.

Typically, the officials asked the consumers – who would either want to deposit money or seek loans – to put a part of their money/loan into a fixed deposit (FD). They would then make the applicants sign policy documents written in English, claiming they were for an FD. Since most of their customers couldn’t read or write English, they would have no idea about the product they were signing up for.

Manohar Das Vaishnav, who trusted the bank with his retirement money, was shocked when he learnt he had been sold an insurance plan which required him to pay a premium of Rs 1,00,000 every year.

“I got Rs 4,00,000 as gratuity from my employer on retirement. The money was deposited in the ICICI branch in Fatehnagar Udaipur. They got me to sign a form written in English saying it was for a fixed deposit. But they withdrew Rs 1,00,000 from my account and put it in an insurance plan,” says Vaishnav (63), a retired employee of Tilam Sangh, a state run oil company.

The SOG investigation found several irregularities by bank officials – faking age (lowered) and annual income (increased) of applicants, making calls to ICICI call centres posing as the consumer to establish consent, faking witnesses and not cooperating with the police.

“So far, our investigation has revealed fraud and serious violation of IRDAI guidelines. The bank and the insurance authorities also did not cooperate with the investigation and tried to mislead us. The scale of this fraud is massive,” Mahaveer Singh Ranawat, additional SP (SOG) who conducted the preliminary investigation, told The Wire.

The pre-probe established the connivance of officials from ICICI bank, and ICICI Prudential Insurance company.

ICICI Bank and ICICI Prudential Life Insurance officials are under the scanner for violating norms and not getting informed consent. Credit: Reuters

“The complainant got a loan under his Kisan Credit Card from the bank. The bank manager and some officials issued him an insurance policy, with a recurring annual premium of Rs 50,000, out of the loan amount.  The victim was told it was a fixed deposit and made to sign policy documents in English, fraudulently,” the SOG’s investigation report, accessed by The Wire, reads.

“IRDAI norms require the consumer’s signature on the benefit illustration document, which was not done. The applicant’s educational qualification and annual income were falsely increased (to meet eligibility criteria). The applicant says his signature was forged on form 61 (required for premium over Rs 50,000).

Balchandani, the ex-employee who blew the whistle on the fraud, says most insurance companies resorted to similar ploys to meet their targets.

“The fraud was in connivance with ICICI bank and ICICI Prudential. While I was an employee, I informed the senior management about these unethical practices. [However], they started harassing me and pressurised me to leave the company,” says Balchandani.

“I left the company after serving my two-month notice period. Then I started my consulting firm where we raised issues of such poor farmers, widows, BPL members, students etc with the RBI, IRDAI, the Serious Fraud Investigation Office, finance ministry and the Prime Minister’s Office,” he adds.

After leaving ICICI, Balchnadani claims to have helped 400 people get their money back from “almost all insurance companies”.

“However, more than 250 clients were just from ICICI. I believe the level of this fraud is institutional. They have branches in rural areas and had access to database of illiterate people who trusted the bank, which the bank used for their own benefit and target completion,” he alleges.

ICICI’s response
While ICICI Prudential officials did not answer any queries raised by The Wire over email, some officials met this correspondent privately on December 13.

During the meeting, Rajiv Adhikari, the vice president of corporate communication and investor relations, ICICI Prudential, claimed that the company had returned the money to some of the complainants whose names came up during the SOG’s pre-investigation.

The bank has claimed that it has returned the money to the complainants and also alleges that the whistleblower employee helped in duping the customers. Credit: Reuters

However, the police doesn’t accept these claims. SOG additional SP Mahaveer Singh Ranawat maintains that ICICI and ICICI Prudential officials did not cooperate at all with the investigation. He re-affirmed his stance when The Wire contacted him to ask about the company’s version.

“They might have given the money back to not just three but 30 victims. They did that out of fear of the police. But does that mean there was no fraud? Tomorrow if someone steals money from you and then returns it, would it not be theft?” Ranawat said.

Whistleblower targeted
ICICI Prudential officials also accused Balchandani, the ex-employee and whistleblower, of misappropriating money from some clients. Adhikari said the company had filed an FIR against Balchandani, who had to spend a month in judicial custody.

“Yes there was a case against him filed by the company but all I know is it’s in the trial stage now. Whatever the outcome of that, it does not absolve the company and its officials from the crime they committed,” Ranawat told The Wire.

On April 1, 2016, Saini, associate regional manager, filed an FIR against Balchandani at Udaipur’s Bhupalpura police station for harming the company, duping consumers, stealing sensitive data and causing financial loss. However, on April 30, 2016, the police presented a closure report in the court based on the fact that it had not found any wrongdoing on Balchandani’s part.

“The complainant alleged that the respondent (Balchandani) stole sensitive company data but couldn’t present any evidence proving it…the respondent helped those consumers get their money back who approached him after the company failed to help them…(Balchandani) did not profit from the company, nor did the company suffer from any illegal harm…had he duped any consumer, they would have surely complained against him…the investigation clearly establishes that consumers reached out to him because the company did not inform them of the risks and benefits of the policies, nor of the rules regarding getting their money back,” the final report, submitted by investigating officer Himmat Singh in the court, read.

Balchandani claims the case was later re-opened without the standard operating procedure in May or June last year and he was taken into custody on September 26, 2016, just a day before the high court was to begin hearing the PIL filed by him, and consequently, he could not appear in the court.

“After the closure report, the ICICI group again approached me in May 2016 and a meeting was held in Hotel Radisson on June 8 and subsequently on July 5 wherein again I was requested (not threatened this time) to not escalate the cases to regulatory authorities and was promised an appreciation letter for my services and appropriate help by the ICICI group in getting certain approvals from IRDA in setting up of a consumer advocacy group for helping clients affected by misselling of insurance products. However they later refused any appreciation letter or anything else in writing,” Balchandani told The Wire.

“By this time we had realised that our complaints are falling on deaf ears and only the cases highlighted by us were being resolved and the company took no action against their employees to stop such corrupt practices. So I filed a public interest litigation in Rajasthan high court on September 21, 2016, which was listed to be heard for admission on September 27. But I was taken into custody just one day before my scheduled court appearance,” he claims.

(Source: The Wire)

Why a new bill by government is terrifying the Indian bank depositor

Ours is a deposit-driven banking system, so borrowing a clause from Western, credit-driven model is laced with difficulties. This bill gives power to a government entity to use depositors’ money to save a bank on the verge of bankruptcy. This government entity can declare the bank doesn't owe you any money though you have deposited your hard earned money with it. 

The Financial Resolution and Deposit Insurance Bill, 2017, first introduced in Lok Sabha in August this year during the Monsoon Session of Parliament, and currently undergoing scrutiny by a joint parliamentary committee, is in the eye of a political storm. A number of columnists and banking sector experts have red-flagged the “bail-in” clause – clause 52 of the draft legislation – to indicate that potential harm to deposits, in the form of savings accounts, might be in the offing with the Bill that will be taken up once again during the Winter Session of Parliament.

The FRDI Bill essentially proposes to create a framework for overseeing financial firms such as banks, insurance companies, non-banking financial services (NBFC) companies, stock exchanges, among others, and in case of insolvency, work out options. The “Resolution Corporation” which is supposed to look after the process and prevent the banks from going bankrupt, will be doing this by “writing down of the liabilities”, in others words, a “bail in”.

Though common in European and American banking systems, the bail-in clause in the Indian banking system that – for the ordinary citizen – is largely deposits-driven, and not as much credit-driven, could be laced with difficulties. Particularly at a time when the growing menace of rising non-performing assets (NPAs) or bad loans has hit an all-time high, with PSU banks writing off Rs 55,356 crore in the first two quarters of the fiscal year 2017-18, about 54 per cent higher than it was last year, the bail-in clause is alarming, to say the least.

What’s the bail-in clause?
A bail-in is different from a “bail-out”, wherein insolvency is averted by infusion of money from external sources, such as tax-payers money that government pours in to recapitalise banks, as happened during the 2009 trillion-dollar Wall Street bail-out, one of the first decisions taken by former US president Barack Obama. However, unlike a bail-out, a bail-in involves transferring the bank’s liabilities and assets – through different means and restructuring of its debt.

The bail-in clause in the FRDI Bill seeks to absorb the losses of the bank and insurance companies and prevent insolvency by prioritising the restoration of capital and asset of the bank over and above the safety of the depositors’ money. How? Clause 52 of FRDI Bill, 2017 empowers the proposed Resolution Corporation to cancel the liability owed by a bank, and/or change the very nature of a loss-ridden balance sheet by turning part of deposits into bank shares, or another security.

Kapil@kapsology

Modi government's FRDI bill may take away all your hard-earned money! Take a look!

10:36 AM - Dec 6, 2017

•  2222 Replies
 
•  311311 Retweets
 
•  213213 likes

The Bill says that in case of a bank failure, the proposed Resolution Corporation will “provide deposit insurance up to a certain limit”, which has not been specified. Under the existing (1962) law, all deposits up to Rs one lakh are protected by deposit insurance under the Deposit Insurance and Credit Guarantee Corporation Act, but that limit has been removed in the FRDI Bill.

How does it affect security of deposits?
In the wake of demonetisation, when citizens were cut off from accessing their own money in the banks with the daily cash withdrawal limit and long, serpentine ATM queues that proved fatal for about 140 odd Indians, the bail-in clause does send off the alarm bells. As per the FRDI Bill, the Resolution Corporation is entitled to convert a percentage of the deposits with a bank to bank shares and other forms of security, in the name of recapitalisation. This might end up cutting off the small depositors from their hard-earned money, since part of the amount in a savings account can be turned into a fixed deposit or rejigged to become part of bank shares, with the depositor given a miniscule stake in the bank’s doddering fortunes, effectively stalling him/her from withdrawing money as per one’s needs.

AAP

✔@AamAadmiParty

"FRDI has not yet been passed. However the draft bill contains a provision that would allow the Govt to “nationalise” our money to re-capitalise PSU banks.
This is both unjust & immoral and must be opposed and this provision deleted before the bill is passed."- @meerasanyal

9:23 AM - Dec 8, 2017

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•  490490 likes

Much like demonetisation, the bail-in clause wouldn’t really affect the wealthier sections of society, but for the poorer classes locking up one’s deposits in the name of bank recapitalisation after writing off lakhs of crores worth corporate debt is a stinging rebuke of the sprawling millions, who use the bank less for seeking credit and more as a safe-house for their meagre savings. While the banks can see influx of fresh capital with the little rearrangement, this is going to hurt the lower and middle classes, if invoked.

Meghnad

✔@Memeghnad

Finally got a chance to go through the proposed The Financial Resolution and Deposit Insurance Bill, 2017.

And holymotherofgod what the heck!
BAIL-INs!

10:09 AM - Nov 28, 2017

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"This bill gives power to a government entity to use depositors’ money to save a bank on the verge of bankruptcy. This government entity can declare the bank doesn't owe you any money though you have deposited your hard earned money with it. Yes! Our hard earned money that we have saved for our children and for our future. That's why I have started this petition asking the finance minister, Arun Jaitley to remove the 'bail-in' provision from the FRDI Bill," says a petition by Change.org.

Trends in PSU banks worrisome
The financial jugglery of the FRDI Bill is already facing political heat and is likely to create a storm in the Winter Session of Parliament which starts from next week. Despite reassurance from Union finance minister Arun Jaitley, the trust in the government over matters economic is shaky at best. "The FRDI Bill is far more depositor friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors / depositors is not required for bail-in. The FRDI Bill does not propose in any way to limit the scope of powers for the Government to extend financing and resolution support to banks, including public sector banks. The government's implicit guarantee for public sector banks remains unaffected," a government statement said.

Ministry of Finance

✔@FinMinIndia

Certain misgivings have been expressed in the media regarding “bail-in” provisions of the FRDI Bill. The provisions contained in the FRDI Bill, as introduced in the Parliament, do not modify present protections to the depositors adversely at all.

11:02 AM - Dec 7, 2017

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Ministry of Finance

✔@FinMinIndia

The FRDI Bill is far more depositor friendly than many other jurisdictions, which provide for statutory bail-in, where consent of creditors / depositors is not required for bail-in.

11:08 AM - Dec 7, 2017

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•  5151 Retweets
 
•  9696 likes

Hence, FM Jaitley has indicated that a rethink is on the cards, in which the bail-in clause is going to face a serious challenge from the joint parliamentary committee. Given that not more than 30 per cent of the NPAs from corporate defaulters, often wilful defaulters, is likely to be ever recovered, the humungous burden of bad loan on the PSU banks, to the tune of Rs 15 lakh crore, remains an albatross for the fiscal health of public sector banking.

However, coercing depositors to turning their savings to fixed deposits and/or bank shares and other forms of assets that becomes ready capital for the bank and returns its balance sheet to good health, is not the way to recapitalise banks.

(Source: Daily O)