Legal: Bank with care

Legal: Bank with care

Even if you have deposited cash with your bank in the prescribed format, with a valid counter-foil, there can be a freak chance that the money may not appear in your account. Therefore it is important to keep one's guard up with every cheque or cash transaction done. Any irregularities should be brought to the notice of the bank immediately in writing and the evidences should be preserved

Banking facilities in India have taken several technological leaps in the past decade but deficiency in service still remains on some fronts. With cash and cheque transactions, one needs to be especially careful as the chances of fraud are always there.

When Pooja G Joshi deposited five lakh rupees in cash with her Vijaya Bank branch in Mumbai in June 1997, little did she know that she would have to fight a 10-year long consumer court battle to claim her money from the bank. Pooja Joshi had a savings and current account with the bank for her business. She deposited five lakh rupees in her account by filling in the printed pay-in-slip issued to her by the bank. Since the cashier was not available on the day, the then chief manager of the bank accepted the cash and put his initials on the counter-foil and also stamped it with the rubber stamp of the bank. Four months later, when Joshi's chartered accountant was going through her business accounts, he drew his client's attention to the fact that the five lakh rupees had not been credited to her account. When Joshi's letter to the bank did not elicit a satisfactory response, she sent Vijaya Bank a legal notice which was returned unaccepted. She then filed a case in the Maharashtra State Commission seeking redress.

The State Commission decided the case in favour of the consumer. The Bank pleaded that the consumer had never deposited the amount, and that it was not true that their cashier was not available on the day the consumer claimed she had deposited the money. The bank said that the acknowledgement of the chief manager shows clearing of transfer transaction only and not a cash transaction specifically, as the consumer had alleged. The purported counter-foil may have been issued for transfer or for clearing a cheque, Vijaya Bank claimed.

The State Commission did not find much merit in the bank's arguments and directed the bank to credit and pay a sum of Rs 5 lakh to the respondent with interest at the rate of 7.5% p.a. w.e.f. 3.6.1997 till realisation and to pay a compensation of Rs 1 lakh.

Vijaya Bank filed an appeal in the National Commission where the Commission noted the following points:

• When the bank acknowledged that the signatures on the counter-foil presented by the consumer as evidence was indeed that of its Chief Manager, this means that some transaction did take place, whether by cheque or cash. Why then was that amount not credited to the consumer's account?

• The bank has not provided any evidence to show that money had not been received by it. The bank did not file the affidavit in evidence of the Chief Manager who had put his signatures and the rubber stamp of the bank on the counter-foil. The National Commission said that it is the chief manager who could have been in a position to rebut the assertion made by the consumer in an effective manner. Instead of filing the affidavit of the then chief manager, the bank filed the affidavit of the assistant manager of the bank who did not have any personal knowledge of the transaction. The bank also did not file an affidavit of its cashier who was unavailable on the day Joshi's transaction took place.

With this evidence in place, the National Commission did not have any hesitation in deciding that the verdict of the Maharashtra State Commission was a fair one. The Bank was held liable for deficiency in service as it had accepted Rs 5 lakhs in cash but had not credited it to its customer's account.

Caution while dealing with banks

• While depositing a cheque in the bank, along with pay-in -slip, the counter foil should be kept for record till the money is credited to your account.

• One should write the account number at the back of the cheque even though account number is written on the pay-in -slip so that there is no chance of misappropriation of the cheque

• If you don't have access to e-statements or e-banking facility, check your account balance after every transaction through the ATM in order to ensure that there is no double transaction, even by mistake.

• While taking cash from the bank, count the cash when received from the counter or the ATM. If there is any discrepancy, report it to the bank there and then.

• Write your contact phone number on the pay-in-slip.

• While writing the pay-in slip, check the account number twice, try to maintain the same signatures. Dividend cheques generally need to be signed at the back of cheque before being deposited

• PAN number is required for withdrawal of fifty thousand or more rupees in cash.

Consumer solutions to the financial fix

This financial crisis began with a failure to protect consumers. Effective, affirmative and preventative consumer protection needs to be a major part of the global solution.

1. Stop blaming the consumer: Consumers face the paradox of being blamed for the present crisis due to insufficient prudence (irresponsible borrowing) while hampering recovery because of an excess of prudence (insufficient consumption).

Consumers International (CI) believes governments and the Financial Services sector need to stop shifting the blame and put their own houses in order.

2. End reckless investment and start supporting essential services: Following years, if not decades, of reckless behaviour, banks are now scrabbling for lower risks. As a result they are refusing to lend across the board. Not only does this restrict consumers in need of credit, but it also puts investment in vital public infrastructure under threat. As a result, the failure of private financial institutions is crippling investment in public goods such as universal water, electricity and healthcare provision.

CI believes the financial sector and the governments that regulate it must prevent such irresponsible behaviour by fully incorporating risk assessment and risk coverage in to banking practice.

3. Divide retail and investment banking: The banks have become too complex; using consumer deposits to leverage elaborate and unsustainable investments.

CI believes the restructured financial services industry must re-establish a clear division between retail banking and investment banking. This is a basic precursor to protecting consumer deposits and reining in irresponsible investor lending.

4. Impose pro-consumer bail-out conditions that promote sustainability: While consumers struggle to get credit and small businesses face bankruptcy, banks and major industries plead they are ‘too big to fail'. If this indeed the case and the social costs of their demise are so great that taxpayers have to step in, then CI believes any support must come with strict conditions on future investment.

There needs to be a regulatory quid pro quo where bail-outs require commitments on sustainable development, ethical standards and greater corporate responsibility. Transparency is also needed from root to branch. Not least in the provision of consumer financial services.

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