Sunday, January 14, 2018

Justice Jasti Chelameswar has described it a defining moment in Indian history. You can’t argue with that whether you see him and his three brother judges as honest whistleblowers or driven by other motives.
It is a defining moment because it casts a thick, dark shadow over our most respected, loved and valuable institution, the judiciary. It also brings back to me a lesson one of our greatest chief justices had taught me once, the real Power of One, or how just one individual could mend a broken institution, or raise its stature to a level nobody will be able to pull it down long after them.
This was the launch in September 2011, at India Habitat Centre, of The Cobra Dancer, written by veteran Andhra journalist Devipriya. It is the somewhat curiously titled biography of former and legendary Central Election Commission observer K.J. Rao, who will always be remembered for giving us the cleanest elections in Lalu’s Bihar.
This event was different not only because it was so unlike the usual Page 3-type book release with celebs, wine and cheese. The audience was mostly Rao’s current and former colleagues, many senior citizens and some activists. There was almost no national or even local media. The only cameras I spotted were from some Telugu TV channels.
But there was some wisdom dispensed in that IHC hall that morning, as the speakers, with the exception of this writer, were all people who have built fame and admiration in not just leading our greatest institutions, but also developing them into the brands we feel so proud of: former Chief Justice of India J.S. Verma, former Chief Election Commissioner J.M. Lyngdoh and S.Y. Quraishi, then CEC designate.
It was something that Justice Verma said, while explaining the challenge of institution-building, that got me thinking. An institution can rise to its true strength, and truly play the role the founding fathers mandated for it, only if it is led by a person “who has no past (to hide), and no expectation (of any reward) from anybody in the future”.
Someone who has no past and no greed for anything in the future? Simple enough, you might think. But it isn’t. It is tough enough to find many people with nothing to hide in their pasts, so they are not prone to blackmail, or weighed under by IOUs conceded. People who can judge a case, run an election, prosecute a criminal politician, investigate a corrupt bureaucrat effectively and fairly. But where do you find someone who, in addition to this, would be willing to retire quietly into obscurity? Our system is much too brutal and clever to let such rare people rise anywhere close to the top. That is why it is only providentially, rather than by choice, that one such is put in charge of an institution. And then the institution changes, and rises to its true power.
How many of our institutions do we really feel proud of today? That we trust fully to protect our constitutional rights and liberty? Your count will not go beyond two, the Supreme Court and the Election Commission. In both cases, we were fortunate that just a couple of remarkable people came to lead them at some crucial junctures of our history. Justice Verma himself picked up the thread from the great judges of the seventies, a remarkable handful led by late Justice H.R. Khanna in a cruel and crucial decade for our democracy, to raise the Supreme Court to its true constitutional power, respect and glory. Verma then also took the weight of the same moral authority to the National Human Rights Commission.
T.N. Seshan showed the country — and the Election Commission itself — the power that the Constitution had intended to grant it but that his predecessors had never used, in the mistaken belief that they were merely another department of the government. The EC was fortunate again to get an even more formidable chief—and not a fraction as controversial or idiosyncratic as Seshan—in J.M. Lyngdoh, who took its reputation and credibility even higher, burying a tradition of state-sponsored rigging and terror threats in Kashmir and defying Narendra Modi’s loaded “James Michael Lyngdoh” chants to hold another election in Gujarat on his own terms. Between the two of them, they built Brand EC to such a level that even the frailties of the odd lesser successor have not been able to dent it.
Seshan himself failed to pass the second part of Justice Verma’s test, by his delusional quest for Rashtrapati Bhavan. But to his credit, he had taken the image of the institution so high that the only stature his hubris damaged was his own. The EC then survived many controversies and shenanigans, and at least one CEC who completely flunked the Verma test. Forget going into retired obscurity or the lecture-/book-writing circuit, he cadged a Rajya Sabha membership on a party ticket and then a ministry so insignificant (sports) that the only reason he was noticed was because of his unseemly turf wars with Suresh Kalmadi and a fellow Gill (KPS) of the Indian Hockey Federation.
Today nobody dares to mess with either the EC or the SC. One can still countermand an election in Bihar or Kashmir and the other can set the CBI on the Sohrabuddin case. Both have survived sabotage, subterfuge, allurements and vilification by the political class. All because a few, just a few, good men came to lead these at some providential moments of time.
Can you imagine how much stronger we would have felt as a nation if just two other institutions, the CBI and the CVC, had also been similarly fortunate? We will wait for that to happen. But until then, we do owe a debt of gratitude for these four judges who, collectively, have exercised that Power of One. It will be disappointing if their unprecedented “coming out” merely jolts the judiciary and allows the executive to play with the cracks. It is more likely that it will lead to much fairer debate and greater transparency and bring new strength to our most hallowed institution. It is a reasonable expectation on this historic, but sad day.

Saturday, January 13, 2018

Rumble in apex court: 4 judges accuse CJI of breach of norms

In an act they themselves described as “extraordinary”, four seniormost judges of the Supreme Court publicly accused Chief Justice of India Dipak Misra of selectively assigning cases to judges of his choice without any rational basis and refusing to take corrective measures about it.
Transcending judicial protocol that sitting judges should not interact with the media, Justices Jasti Chelameswar, Ranjan Gogoi, Madan B Lokur and Kurian Joseph, in a first-of-its kind press conference, accused the CJI of assigning cases of “far-reaching consequences to the nation” to particular judges against the time-tested convention, practice and tradition of the apex court.
In a letter circulated by the judges at the press conference, the four judges accused certain Supreme Court judges of judicial indiscipline. The letter, addressed to the CJI, said certain judges arrogate to themselves the “authority to deal with and pronounce upon” cases which ought to be heard by other appropriate Benches. The letter is of October 2017 origin.
Justice Chelameswar, speaking for the four judges, said they had collectively tried to persuade the Chief Justice to take remedial measures, but their efforts unfortunately failed.
The judges said that with the independence of the judiciary and the future of democracy at stake, they had no other choice but turn to the nation for help. “We had no other choice but communicate to the nation to please take care of this institution.”
Justice Chelameswar said they decided to act now because they did not want “any wise men say 20 years later that Justices Chelameswar, Ranjan Gogoi, Lokur and Kurian sold their souls and did not take care of the interests of this illustrious institution”.
Justice Chelameswar recounted that the immediate trigger for the press conference was a meeting they held with the Chief Justice on Friday morning regarding the assignment of a particular petition seeking an independent probe into the mysterious death of CBI judge Loya to a particular Bench.
They had expressed their reservations to the CJI about the assignation of the Loya case. But the CJI had refused to budge. They had then informed the Chief Justice about their intention to go public.
Though Justice Chelameswar did not name the Loya petition specifically, Justice Ranjan Gogoi, who is scheduled to take over as Chief Justice of India after Chief Justice Misra retires on October 2 this year, spoke up to say the petition is indeed regarding Judge Loya’s death. “Yes, yes. It was Loya case,” Justice Gogoi said.
“It is the discharge of our debt to the nation that brought us here. We have discharged our debt to the nation by saying what is what,” Justice Gogoi said firmly.
The revelation at the press conference comes a couple of hours after a Bench led by Justice Arun Mishra heard the Loya petition.
Without naming any, Justice Chelameswar said that several other important cases like this had been assigned to preferred Benches over the past months. The convention of the court demands that important cases of public interest or sensitive matters should be first heard by the CJI. If the CJI is not willing for some reason to hear the case, then it should be assigned to the next seniormost judge in the Supreme Court. Instead of that, such cases have been assigned to certain Benches and eventually destined to a quiet burial.
“Unless the institution is preserved and allowed to maintain its dignity, democracy will not survive. The hall mark of a good democracy are independent and impartial judges,” Justice Chelameswar said.
When asked whether the CJI should be impeached, Justice Chelameswar said “let the nation decide”.
The four judges denied they were breaking ranks by holding this press conference, and said they were only discharging their responsibility to the nation and asking the nation to decide. “Tomorrow is Saturday, then it is Sunday, and on Monday we go back to do our job,” Justice Chelameswar said.
The judges had finished their roster of cases for the day before meeting up at Justice Chelameswar’s residence at noon to hold the press meet. Justice Chelameswar, at 10.30 am, addressed the courtroom, saying he would only hear urgent matters and finished hearing them before rising for the day.
The Bench led by Chief Justice Misra also rose at noon, saying they would re-convene at 2 pm to hear the rest of the cases listed for the day.
Justice SA Bobde, who is expected to be Chief Justice of India in November 2019, went to meet Justice Chelameswar later during the day.
Speculation was rife in the media throughout the day that Chief Justice Dipak Misra would call a press conference, but no such development occurred.

Tuesday, January 9, 2018

GDP Data Brings Us Back to the Basic Question: Where Are the Jobs?

Late last week, the central statistics office of the government of India declared its forecasts for the gross domestic product (GDP) growth for 2017-2018. The GDP is a measure of economic size and the GDP growth is a measure of economic growth.
The GDP growth for 2017-2018 is expected to be at 6.5 per cent. It is the slowest economic growth that the country will see after Narendra Modi took over as the prime minister. Take a look at Figure 1, which plots GDP growth.
Figure 1:

This slowdown is a clear impact of the negative impacts of demonetisation continuing into 2017-2018, which was followed by the terribly botched up implementation of the Goods and Services Tax (GST).
Take a look at Figure 2, which basically plots the growth of various sectors.
Figure 2:

Figure 2 tells us that agriculture and industry in 2017-2018, will slow down considerably in comparison to 2016-2017. Within industry, manufacturing will slow down considerably as well. The growth of the services sector continues to remain robust. Within the services sector, the public administration, defence and other services, which is basically a representation for the government, grew the fastest at 9.4 per cent (though it slowed down in comparison to last year).
What this basically means is that a fast growth in government expenditure in 2016-2017 and 2017-2018, pushed up economic growth, otherwise the economic growth would have been lower than what it finally turned out to be.
Now let's take a look at investment to GDP ratio in Figure 3.
Figure 3:

For the year 2017-2018, the investment to GDP ratio is expected to be at around 29 per cent of the GDP. This ratio has been falling since 2011-2012 and there have been no signs of improvement since then. I have taken data from 2011-2012 onwards because the new GDP series data being used since January 2015, has a back series starting from 2011-2012 only.
In fact, the data from Centre for Monitoring Indian Economy suggests that new projects announcement in the period of three months ending December 2017, came in at a 13-year low. Take a look at Figure 4.
Figure 4:

The new investment projects announced during the period of three months up to December 2017, were the lowest since the period of three months ending June 2004. This is a clear indication of the fact that the industry is not betting much on India's economic future because if they were they would be expanding at a much faster rate and announcing more investment projects than they currently are. The industrialists may say good things about India in the public domain and in the media, but they are clearly not betting much of their money on the country.
Unless, investment picks up, jobs can't be created. And without jobs the one million youth entering the workforce every month or India's so called demographic dividend, is likely to turn into a demographic disaster. Indeed, that is a very worrying point.
To conclude, the GDP data for 2017-2018, brings us back to that basic question: Where are the jobs?
Errata: In the piece dated January 5, 2018, I had said that the person buying the bond is a payee. That was incorrect and a very silly mistake from my end. The payee is the beneficiary of the bond not the buyer. My apologies for the mistake.
Vivek Kaul is the Editor of the Diary and The Vivek Kaul' Letter. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

Saturday, January 6, 2018

Electoral Bonds Do Not Address Key Issue of Lack of Transparency in Political Funding

In the budget speech, the finance minister Arun Jaitely made in February 2017, he said: "Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections."
He further added: "An amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond."
If one were to summarise the above two paragraphs what Jaitley basically said was that the government of India proposed to introduce electoral bonds to make transparent the method of funding political parties in India.
Eleven months later on January 2, 2018, the Narendra Modi government notified "the Scheme of Electoral Bonds to cleanse the system of political funding in the country." The press release accompanying the decision listed out the various features of these bonds. They are:
1) Electoral bonds would be issued/purchased for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore, from specified branches of the State Bank of India (SBI).
2) The electoral bond would be a bearer instrument in the nature of a promissory note and an interest free banking instrument. A citizen of India or a body incorporated in India will be eligible to purchase the bond.
3) The purchaser would be allowed to buy electoral bonds only on due fulfilment of all the extant KYC norms and by making payment from a bank account.
4) It will not carry the name of payee (i.e. the person buying the bond).
5) Once these bonds are bought they will have a life of only 15 days. During this period, the bonds need to be donated to a political party registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly.
6) Once a political party receives these bonds, they can encash it only through a designated bank account with the authorised bank.
7) The electoral bonds shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the central government. An additional period of 30 days shall be specified by the central government in the year of the general election to the House of People.
So far so good. There are a number of points that crop up here. Let's discuss them one by one:
1) The finance minister Jaitley in his budget speech last year had talked about electoral bonds introducing transparency into political funding. As mentioned earlier, these bonds will not carry the name of the payee i.e. the person buying the bond and donating it to a political party. The question is how do anonymity and transparency, not exactly synonyms, go together? This is something that Jaitley needs to explain.
2) The electoral bonds continue with the fundamental problem at the heart of political funding-the opacity to the electorate. With the KYC in place, the government will know who is donating money to which political party, but you and I, the citizens of this country, who elect the government, won't. This basically means that crony capitalists who have been donating money to political parties for decades will continue to have a free run. The electoral bonds do nothing to break the unholy nexus between businessmen and politicians.
3) For these bonds to serve any purpose, they should have the name of the payee. And these names should be available in public domain, with the citizens of the country clearly knowing where are the political parties getting their funding from.
4) Supporters of the bonds have talked about the fact that anonymity is necessary or otherwise the government can crack down on those donating money to opposition parties. This is a very spurious argument. With the KYC in place, the State Bank of India will immediately know who is donating money to which political party. And you don't need to be a rocket scientist to conclude that this information will flow from the bank to the ministry of finance. Hence, we will be in a situation where the government knows exactly who is donating money to which political party, but the opposition parties don't. If the government of the day can know who is funding which political party, so should the citizens.
Now what stops the government (and by that, I mean any government and not just the current one) from going after the citizens or incorporated bodies for that matter, donating money to opposition parties. The logic of anonymity clearly does not work.
The structure of the electoral bonds seems to have been designed to choke the funding of opposition parties, more than anything else. Also, it is safe to say, given these reasons, cash donations will continue to be favoured by crony capitalists close to opposition parties.
5) There is one more point that needs to be made regarding political donations as a whole and not just the recently notified electoral bonds. Earlier the companies were allowed to donate only up to 7.5 per cent of their average net profit over the last three years, to political parties. They also had to declare the names of political parties they had made donations to. This was amended in March 2017. The companies can now donate any amount of money to any political party, without having to declare the name of the party.
To conclude, electoral bonds do not achieve the main purpose that they were supposed to achieve i.e. the transparency of political funding. All they do in their current form is to ensure that the ruling political party continues to consolidate its position, at the cost of the citizens of this country. Of course, given the marketing machinery they have in place, they will spin it differently. Given this, the WhatsApp wars on this issue have already begun.
Vivek Kaul is the Editor of the Diary and The Vivek Kaul' Letter. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

Friday, January 5, 2018

The devil is in the fine print

Given his interest in cricket, this must be called Finance Minister Arun Jaitley’s ‘doosra’. His announcement on electoral reforms in his Budget speech combined an element of surprise, some degree of deception and a sleight of hand — all that go into a doosra in cricket. It is a mark of his deftness that his delivery foxed many a seasoned player.

Initial reactions to Mr. Jaitley’s announcement ranged from gushing to lukewarm approval. Breathless TV anchors announced it as a historic act of cleansing our polity, just as Mr. Jaitley would have us believe. More sober commentators saw it as a significant though inadequate step forward in the right direction. Even the sceptics felt that the Finance Minister had at least put the issue of political funding on the table. Everyone thought the ball was headed in the right direction. It took a while for democratic reform and right to information activists to find out that this was the wrong one. The fine print of the Finance Bill showed that Mr. Jaitley’s proposals for bringing ‘transparency and accountability’ would achieve exactly the opposite. Ranging from redundant to sinister, these proposals would rob the system of whatever little transparency and accountability that it has today. Worse, they draw national attention away from a series of electoral funding reforms that the Election Commission and democratic reform activists have been asking for a long time.


All the four elements
This might sound like the usual oppositional and alarmist reaction. So, let us carefully unpack each of the four elements of the scheme announced by the Finance Minister to “cleanse the system of funding of political parties”. First, he claimed to follow the Election Commission in proposing a ceiling of ₹2,000 on the amount of cash donation that a political party can receive from one person in a year. Second, he announced that political parties would be “entitled to receive” donations by cheque or digital mode from their donors. Third, he proposed a new scheme of Electoral Bonds. Fourth, he said that every political party would have to file its Income Tax return within the prescribed time limit in order to enjoy exemption from payment of income tax. He insisted that this scheme will bring about “greater transparency and accountability in political funding, while preventing future generation of black money”.

Now, the second and the fourth components of this scheme are redundant, as these are no different from what the existing law provides for. It does not require a new law to say that political parties are “entitled” to receive donations by cheque or digitally. They were always entitled to this and were already doing so. We needed a new law to mandate that the parties would be “required” to receive donations by cheque or digitally. The Finance Minister did not propose any such thing. Similarly, the existing law requires political parties to file their income tax returns to enjoy tax exemption. The Finance Bill now proposes a new proviso in Section 13A clause (d) of the Income Tax Act 1961 that explicitly says that the return should be filed within the stipulated time limit. So far, all major parties have routinely flouted this requirement. Big national parties file their return months after the due date and many parties don’t file the return at all. No one gets penalised for this non-compliance. The government really did not need this amendment if it had the will to enforce the existing law.

Limiting cash donations
The proposal about limiting cash donations to ₹2,000 has been widely misunderstood and therefore welcomed as a first step in the right direction. Everyone was foxed into believing that the limit for anonymous donations, contributions that are exempt from reporting, has been reduced from the existing ₹20,000 to ₹2,000. That is what the Election Commission (EC) had asked for in its revised compendium of Proposed Electoral Reforms in December 2016. The Finance Minister’s speech claimed to follow the EC’s advice. The Finance Bill reveals something different. The existing limit of ₹20,000 on anonymous donation as per Section 23 of the Representation of the People Act (RPA) has been left untouched. The Minister has merely proposed a new, additional, clause that limits cash donation from one source to ₹2,000 in one year.


Notice that there was and is no requirement to disclose a contribution by cheque or digital transfer up to ₹20,000. There was and is no limit to how much a party can receive from anonymous donations. More importantly, there was and is no limit to how much overall a party can receive in cash from all sources put together. Following the Law Commission’s recommendations, the EC had proposed that no party should be allowed to receive more than ₹20 crore or 20% of its overall donations from anonymous sources. The Minister did not pay heed to this.

This proposal is unlikely to make any difference to the business as usual for political parties. The fact is that most political funds remain in the pockets of party leaders. A small amount enters the coffers of the party and becomes party funds. A tiny fraction of party funds is placed in the bank accounts of the party to meet some expenses that cannot remain invisible. The figures widely discussed in the media relate to that tiny fraction of party funds, which is a small proportion of political funds. Most of this is not voluntary contribution or donation. Much of what political parties show as donations is black money generated by party leaders which is turned into white money by way of book entries as donations to the party. So far, the accountant who had to covert, say, ₹100 crore had to make sure than the entire amount was broken down into entries of ₹20,000 or below. Now they will absorb the same amount by breaking it down into entries of ₹2,000 or below. All that the proposed law would ensure is more book entries and perhaps a higher fee for the accountant. Otherwise, it would be business as usual.

Trouble with electoral bonds
Still, one can say that this change would do no harm. But that is not the case with the new proposal of Electoral Bonds. Although the detailed rules are yet to be framed, the basic outline of the scheme is clear. Anyone who wants to donate to a political party would be able to purchase bonds from authorised banks. This purchase will have to be in ‘white money’ against cheque and digital payments only. Once purchased, these bonds will be like bearer bonds and will not contain the name of the eventual beneficiary. These bonds shall be redeemable only in the designated account of a registered political party within a prescribed period. So, the donor’s bank would know about who bought how much of Electoral Bonds, but not the name of the party which received it. The party’s bank would know the amount deposited through Bonds, but not the identity of the donor. The Income Tax authorities and the EC would not know anything: reporting of donor, beneficiary, or even the amount of contribution has been exempted by amending the Income Tax Act Section 13A (b) and the RPA, Section 29C. The net effect, and indeed the purpose, of the Bonds will be that no one except the fund giver and the fund receiver would know about this exchange done in white money with full tax exemption.


Let us think of a classic quid pro quo. A government favours a business house in a mining or spectrum or oil deal to the tune of ₹5,000 crore. Both of them have a fifty-fifty deal. Under the existing arrangement, the business house would have to either declare in its balance sheet a ‘donation’ of ₹2,500 crore to the ruling party, or find that much cash to secretly hand over to the party bosses. If the payment is in white, the party will have to declare the amount and the name of the company to the Income Tax authorities and to the EC. Now, the company could simply purchase Election Bonds worth ₹2,500 crore and hand it over to the party. The company’s balance sheet will show “purchase of Election Bonds” with no name of the beneficiary, while it enjoys 100% tax deduction on that amount. The party will simply deposit the money in its account, with no obligation to report anything to the IT authorities or to the EC. It may well report an innocuous amount of, say, ₹3.8 crore as its annual reportable income! So much for transparency!

Once introduced, these bonds will mask whatever little transparency exists in the current system. Instead of the usual practice of converting black money into white, these bonds will push white money into a grey, if not black, trail. Indeed, the black money in politics might go down, as the white money has been provided a perfect cover of secrecy. Why would anyone give any money to a political party through cheque or digital payment and face all the hassle of disclosure?

Arun Jaitley’s doosra is a great leap backwards in the history of election funding reforms.

Yogendra Yadav is President of the newly formed party, Swaraj India.

Thursday, January 4, 2018

There can't be different standards for pvt & govt hospitals: HC

New Delhi: The Delhi High Court today said the Centre and the AAP government cannot have different standards for private hospitals and those run by them as far as instances of medical negligenceare concerned.
The observation by Justice Vibhu Bakhru came during the hearing of a plea alleging medical negligence by Safdarjung Hospital in wrongly declaring a newborn as dead in June 2017.
The infant was brought back to the hospital and put on a ventilator, but died after 36 hours.
The court said that for a similar incident the Delhi government had shut down Max Hospital for two days, so why no action has been taken against the staff or doctors concerned of Safdarjung Hospital.
"The Delhi government closed down Max Hospital for two days on a similar issue. There cannot be two standards, one for the private hospitals and one for government hospitals," it said.
The court asked the Delhi government to place before it the file relating to the Max Hospital incident where a twin baby, born prematurely on November 30, 2017, was wrongly declared dead and was later found to be alive. The baby died a week later.
Directions were also issued by the court to the Medical Superintendent of Safdarjung Hospital, represented by central government counsel Monika Arora and advocate Kushal Sharma, to return all the medical records of the mother and baby to the family within a week. It warned that failure to do so would invite its ire.
The court had earlier ordered setting up of a committee to probe the medical negligence charge against the hospital.
The committee today submitted its report in which it has concluded that it was not a baby but an 'abortus', as it was a 22-week-old foetus, and therefore, "did not merit proactive resuscitation" as it was not capable of surviving.
The panel has held that there does not appear to be any medical negligence on the part of the treating doctors.
However, the court refused to accept the stand saying that five-month-old foetuses are known to have survived even if those incidents were rare and therefore, it cannot be said that in the instant case the foetus could not have survived.
The court was also displeased with the "disturbing" manner in which the foetus was handed over to the family in an envelope and directed the hospital to file an affidavit indicating the person responsible for doing so.
It said that the affidavit should also indicate if any action was proposed to be taken against the individual in question and listed the matter for further hearing on January 18.
According to the petition filed by the parents through advocate Sija Nair Pal, the incident occurred on June 18 this year when the baby was born four months prematurely at Safdarjung Hospital.
The baby was born at 5.45 am, but at 6.00 am the same day the parents were informed that the infant has passed away and the body was handed over in an envelope for the last rites, the petition said.
However, a few hours later, while taking the infant for cremation, it was noticed that the baby was gasping for breath and was rushed back to the hospital.
The hospital provided oxygen to the baby, but the infant did not survive for more than 36 hours, the petition has said.

Tuesday, January 2, 2018

SB a/c balance slip-ups invite 78% p.a. penalty

Banks may come under regulatory scrutiny for imposing disproportionate penal charges on customers for shortfall in maintenance of minimum balance in savings bank accounts.
Most banks have fixed penal charges for non-maintenance of minimum balance in SB accounts at an average rate of 6.5 per cent of every month’s shortfall, which is equivalent to a penal rate of 78 per cent per annum, according to a study, ‘Fault lines in Implementation of Minimum Balance Rule’, by Ashish Das, Professor, Department of Mathematics, IIT Bombay.
“This high rate of penalty appears to have no correlation with the costs for arranging such funds at, say, the call money market rate,” said Das.
“Thus it raises question of efficacy of regulation B (whereby it should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services) of the RBI’s guidelines on levy of charges for non-maintenance of minimum balance in savings bank account,” he said.
Multiple slabs

Underscoring that banks have set multiple slabs of shortfalls and overall the charges are not a fixed percentage of the shortfall, the study said the percentage usually decreases with an increase in shortfall.
The charges may be reasonable in absolute terms but not in relative terms, given that the RBI has defined what, in relative terms, is reasonable, the study elaborated.
In other words, banks have introduced slabs in a manner that vitiates the principle of charges being a fixed percentage of shortfall (under the RBI’s proportionality rule, whereby penal charges should be directly proportionate to the extent of shortfall observed).
“One could have cared less if the banks’ approach had not been on penalising more, in percentage terms, the accounts with smaller shortfalls than the ones with larger shortfalls, thereby leading to accounts with smaller shortfalls cross-subsidising the accounts having larger shortfalls,” said Das.
The study established that most of the banks, in violation to the ‘rule of unbiasedness’ set by the RBI, impose a disproportionately high penal charge in the lower slab of shortfalls than in the higher slab of shortfalls. In this process, the banks thrust undue discrimination in the form of cross-subsidisation for no fault of a vast section of depositors.
Das reasoned that a shortfall in minimum balance maintenance by a savings account depositor can be considered akin to an overdraft facility taken by a customer. The only difference is the credit risk associated with the overdraft.
Since there is no credit risk in shortfall funds, there is no rationale for its cost to exceed the cost of overdraft funds (which was 6-14 per cent per annum as on March 2016, since when interest rates have come down significantly).
“Contrastingly, on the other extreme, the loans through credit cards carry a rate of around 40 per cent per annum. If the cost of highly risky credit card-based funds is 40 per cent per annum, can the cost of zero-risk funds (shortfall in customers’ savings deposit funds) be more than that,” said Das.
Recommendations

Given the extant regulation on minimum balance in savings accounts, the study observed that RBI may like to ensure its compliance not only in letter but also in spirit.
The penal charge rule is not to facilitate adjustments by banks based on their analysis of the distribution of shortfalls and net amount of revenue expected, thereby creating a situation of cross-subsidisation.
The study recommended that the RBI’s enforcement department should be pro-active in checking such situations, which affect the gullible masses directly.
Further, the central bank’s consumer education and protection department needs to pitch-in to protect depositors and educate them about the correct regulation.