From a California-based Doctor to a Watchman – It's a Long, Hard Battle for Financial Consumers

When it comes to bank-related problems, there are no class barriers—each one of us is equally at risk and at the mercy of abysmal grievance redress system. Consider the stories of these two harried bank customers that Moneylife Foundation has been trying to help.

Prakash Awadhesh Mishra (Mishraji to us), from Azamgarh in Uttar Pradesh, works as a watchman in Mumbai. Like many people from that impoverished state, he is up-to-date on current affairs, works very hard—often doing 18-hour shifts—to earn and save every penny for his family and their future.

What he does not have is a proper roof over his head in Mumbai and, consequently, an address proof. So, opening a bank account is a huge challenge and a privilege, despite all the lip-service to financial inclusion paid by the Reserve Bank of India (RBI).

He told us how he managed to open an account at Union Bank of India (UBI) only through a recurring deposit which, apparently, did not need strict address proof. Over time, he persuaded the Bank to convert his savings into a fixed deposit (which has a princely sum of Rs2 lakh) and a savings account with Rs16,000. He told us how he managed to open an account at Union Bank of India (UBI) only through a recurring deposit which, apparently, did not need strict address proof. Over time, he persuaded the Bank to convert his savings into a fixed deposit (which has a princely sum of Rs2 lakh) and a savings account with Rs16,000.

So, when he changed jobs and moved from Bandra to Shivaji Park, he didn't dare close his account; but he remained confident that his money was safe in a nationalised bank, until he wanted to withdraw it. Now, look at what happens to people like Mishraji, dealing with incompetent private agencies, sub-contracted to issue key identity documents.

Like most migrants, Mishraji has a PAN (permanent account number) card, because it is the easiest identity to obtain. It was, however, issued with a wrong date of birth (1966). He had retained it, because he had no idea how important it is to get it rectified.

He also obtained an Aadhaar which the government promised was the magic number to open all doors. His Aadhaar also has another wrong date of birth (1 October 1960). He is proud to have an original birth certificate and documents from his village school (rare for people like him) which list his birth year as 1962.

Such mistakes are the norm. Mishraji didn’t realise the imperative need to get them rectified. In his case, every day spent on getting an identity and then rectifying it involves a loss of income.

Earlier this week, Mishraji went back to Azamgarh after five long years in Mumbai. Since he has no home, withdrawing his savings from the bank was kept till the end. A couple of days before he left, he went to the bank to withdraw his savings, only to be told that his account is dormant.

For most educated people, getting it activated is a simple matter of submitting KYC documents afresh; but thanks to inefficient government agencies and wrong IDs, Mishraji faced a nightmare. Unlike millions of others in his situation, he got in touch with Moneylife Foundation. We are lucky to have a very committed former central banker volunteering his time to guide people.

The RBI circular on dormant accounts requires banks to seek KYC documents, to reactivate the account. Typical of RBI, this prescriptive ‘fatwa’ does not take into account people like Mishraji, who don’t have proper documents even while opening the account and end up with no access to their own money. The system has no room for empathy, or alternative verification. So, he was rudely turned away and even calls from a retired CGM (chief general manager) from RBI’s consumer services department was not good enough to vouch for his identity. He, eventually, went back to Azamgarh without a chunk of his savings.

Remember, Mishraji is an unusually smart and well-read person. What happens to millions of migrants who are less literate and more helpless? Wouldn't the system simply gobble up their savings? The massive pool of over Rs19,500 crore in unclaimed deposits transferred to RBI until June 2018 is testimony to this.

Now let us look at another story.

Dr Ajay Sood is a California-based non-resident Indian (NRI) with a non-resident ordinary (NRO) account at Bank of India’s (BOI) Chandigarh branch. The money in the account is his mother’s lifetime savings to be used for her welfare. On 20 July 2018, Dr Sood found that the account was almost emptied out, with two huge debits—of Rs98 lakh and Rs35 lakh, respectively—using cheques from his NRO account.

Not only had he not withdrawn the money, but he had in his possession the original chequebooks with the exact same cheque numbers on which the money was purportedly withdrawn.

After speaking to the Bank and filing a first information report (FIR), he learnt that his mobile number with the Bank had been changed and a false Aadhaar card submitted with his photograph but wrong information about his father’s name. Dr Sood did not even have an Aadhaar-linked account.

Dr Sood is an innocent victim of a fraud that occurred at BOI. But BOI simply would not respond to him. He connected with Moneylife Foundation on 5th September, following which we helped take up the matter with the RBI. This, finally, led to a communication from BOI asking for the original cheques and informing him that the ‘matter of payment’ of the unauthorised withdrawal of Rs1.33 crore was “under process and will take some time. You are requested to kindly bear with us for some more time.” On 19th December, Indian Express reported that the Chandigarh police had arrested two people in connection with the fraud. But that is cold comfort for Dr Sood, since his money has still not been returned.

What if the account were still in his mother’s name and this was her only source of income? Why should the victim of a bank fraud, that calls into question the bank’s weak security system and verification practices, punish an innocent customer?

UPDATE: After the story was published, Dr Sood, came to know credit of his principal amount in his account.

If RBI’s rules limit customer liability for digital fraud and mandate that victims should have their money credited back within 10 days, why is there no time-bound redress system for other innocent victims of bank frauds? Rules for digital transactions have shifted the onus of proving customer negligence in case of “banking system frauds and third-party breaches” to the bank. It is common sense that the same should apply to physical fraud, especially since a large bank ought to have a comprehensive insurance cover for such eventualities.

Since Dr Sood is able to produce cheques with the same numbers that were used to withdraw massive sums of money, the finger points to internal collusion and, yet, he is subject to mental agony and his money has not been returned for over four months.

Where is the accountability of bankers, who dare to ignore a customer who had a hefty Rs1.33 crore deposited with it for safe custody? Why does he need an NGO (non-government organisation) or former RBI officials to intervene to get the courtesy of a formal communication? And what about compensation and interest?

One of prime minister (PM) Narendra Modi’s first big actions was a financial inclusion drive to give all Indians access to formal credit through a bank account. Like several of PM’s big ideas, this one, too, had revived a failed effort of the UPA (United Progressive Alliance) government, but came with better branding (the Pradhan Mantri JandhanYojana—or Jandhan for short), plenty of hype and subterfuge in terms of genuine new accounts opened.

Jandhan was further hyped-up as JAM (Jandhan-Aadhaar-Mobile) during demonetisation (after 8 November 2016) by making Aadhaar and linking of mobiles to bank accounts mandatory (until it was halted after a long-delayed Supreme Court judgement in 2018), not-so-savvy or literate bank depositors became easy prey to digital fraud.

RBI watched and did nothing. Oh wait! Its deputy governor SS Mundra made a speech and published a draft regulation on limiting customer liability. The rules were, finally, notified after an online campaign and tweet-morcha in July 2017. An enabling provision was only the first step. Earlier this month, RBI has promised a separate ombudsman for digital transactions whose rules will be notified in January 2019. This is after complaints of digital fraud have risen to as much as 28% of all complaints, as in June 2018.

Given the pathetic performance of the existing banking ombudsmen, who are openly biased towards banks, this does not hold out much hope for victims who see their hard-earned savings vanish.

Instead of putting in place a robust grievance redress mechanism that works in a time-bound manner and a fair payment of interest, compensation and damages, the government is actually toying with the idea of a digital security cess , to create infrastructure for digital security, on top of making it increasingly mandatory to use digital transactions. Is it any wonder then that there is a massive consumer pushback and people are using more cash than ever before?

For too many people, the lesson from demonetisation is that cash in hand, even when it doesn’t earn interest, is more secure than money in the bank. According to World Bank’s Global Findex Database, 2017, at a whopping 48%, India tops the world in terms of bank users with inactive bank accounts.

While the government has an aggressively different spin on it, the cases that we encounter everyday at Moneylife Foundation show that there is a good reason for this state of affairs. Until RBI is made more transparent and more accountable to people and Parliament about its performance as a banking regulator and supervisor, victims of banking fraud will remain at the mercy of such a callous system—whether they are well-off or poor.