[This is the third part of the draft letter being sent by Naavi.org to RBI in response to the discussion paper on Disincentivisation of issuance and usage of cheques.  Public may send their response before February 28, 2013 to RBI by email at: chequeusage@rbi.org.in  A complete copy as sent with suitably edited is available here. Earlier parts are available here.  Part 1 : Part 2 ]

Process of Discussion

 The discussion paper inviting public comments have been released on the Internet in the RBI website and it is not easily located by a casual visitor to the site. The issue concerns withdrawal of facilities to bankers in the physical space and incentivising e-banking customers. It is therefore imperative that the message should reach non Internet public.

 By restricting the publication to the Internet and the feedback mechanism only to e-mails, RBI has cleverly manipulated the feedback system to get response from people who may not be adversely affected by the decision.

 RBI should therefore release a press notification on the matter in many languages and through the bank branches distribute the discussion paper freely to all bank customers. They should also get the response through each bank branch in writing from the customers before taking any further view on the subject.

 It is also necessary to provide sufficient time  for public to respond.

 If RBI tries to consider the web response as a realistic response from the public it will amount to manipulation of public views to the advantage of vested interests. It may be challenged in a Court only on this ground.

 Specific suggested Action Points and Comments

 (For the sake of avoiding repetition of the contents of the discussion paper the actual recommendation is not mentioned in the following table. Only the serial number and brief particulars are mentioned.)


Discussion Paper Suggested Action Points


General Comments


a)    Targets for implementation- from April 2013

Setting targets dates for transformation of the existing established system which is familiar to an untried, unsafe system on which a majority of the customers are unfamiliar is unwise.


Such transformation has to occur naturally over a period of time and the existing system should be allowed to run out. Even if it takes one full generation, it is unavoidable.


RBI may well consider introducing a new license of a “Money Shop” and provide the payment and settlement services under E Banking in such “Money Shops”.  There will be no question of “Safety” in such an organization since they will not be allowed to use the name “Bank” in their names for promoting their business.


The traditional “Banking” should be left to the physical world in the current form with the benefit of the use of the word “Bank” in their name.


Such a move will segment the traditional bank customers and E Banking enthusiasts into two different types of organizations. Over a period of time both may survive and grow at their own pace.


b)   Dispute Resolution

The concern expressed is correct. For the same reason it is necessary to introduce the systems and let people use it as an alternative measure until such time the systems are considered not only functionally better but also secure, economical and convenient.


Any acknowledgements issued for e-receipts will be legally valid only if they are digitally signed. RBI should not legitimize any other form of issue of receipts. Such a move will be ultra vires various legislative provisions and will also interfere with statutory audit obligations.



c)Bouncing of electronic payments

Section Sec 25 of Payments and Settlements Act both provide punishments for dishonor of cheque/electronic payment on the basis of paucity of funds.


This is no justification for removing cheques from the system.


Cheques are Negotiable instruments and have the character different from one to one payment in an electronic payment system.


Electronic payment system can be a replacement of handing over of cash from hand to hand but cannot produce the negotiable characteristic of a cheque.

d)Card system to be promoted

The suggestion ignores  “Safety”. Card transactions are risky cloning, skimming, impersonation etc are prevalent in the card market on a global scale. Presently widespread irregularities prevail in the credit card industry. Most Banks do not check “Charge slips” before authorizing payments. Many merchants put through fraudulent transactions by raising false charge slips. RBI has failed to monitor the credit card operations of Banks.


In such a scenario, RBI cannot assume the role of a  “promoter” of card business. It will amount to promoting and facilitating frauds.


It is possible that in a future legal dispute, the Payment and Settlement Department of RBI may be cited as a respondent for having facilitated the fraud with a reckless promotion of credit card usage and charged with vicarious liabilities.


Since the discussion paper is in the nature of “Promotion of Commercial Interests”, RBI cannot defend itself in such legal disputes citing its position as a “Regulator”.

e)Customer Liability

The presence of this statement indicates that there is an attempt to “Put words in the mouth of RBI” by Banks who are known to be pushing for shifting the liability of cyber frauds on the customers.


There was a similar attempt during the GGWG deliberations by ICICI Bank and SBI who were part of the GGWG group.


The matter of Bank being liable for Cyber Frauds is well established in law and any attempt to indirectly bring it into these discussions will make the author of the discussion paper and the department of Payments and Settlement directly under the radar of “Deliberate attempt to provide an illegal shield to Banks on Cyber Crimes”.


To make matters clear, there is and need not be any “Apprehension that in case of any unauthorized transaction, the customer would have to shoulder the loss”.  Any such suggestion is mischievous and a  giveaway that the discussion paper has a fraudulent intention ab-initio.


If RBI persists on this argument and does not remove it from the official document, the matter will be aggressively opposed by the community including legal action for trying to mislead the public. This is an attempt to change law through back door and the attention of Supreme Court will be drawn at the earliest to resist any fait accompli.


A separate note will be submitted in this matter by the undersigned to the Supreme Court shortly to keep the highest judiciary in the country informed.


The general basis on which the action points are suggested are themselves untenable and hence the action points that follow as suggestions can only be called baseless.

Individuals as Cheque Users


a)   Free chequebook limitation

“Steep” means that RBI is suggesting banks to be “Usurious”. This is against the collective conscience of bank customers.

b)PDcs for fresh loans

PDCs by definition are not “Cheques”. It is an irony that decades of Banking has gone about with the use of PDCs. It has to be abolished anyway. The loan agreements are sufficient for loan recovery.

c)    Existing PDCs to be converted

No comments because PDCs are considered illegal anyway. Anyway the suggestion is a modification of the loan agreement and hence not legally acceptable as fair.

d)   Credit card dues

This would be an unfair practice. Against the basic tenets of RBI charter. The emphasis on “High Charges” is anti consumer.

e)value limit on cheques

Not legal and justifiable. It will be discriminatory.

f)Dividend warrants

This will be infringing on the shareholder’s rights to receive dividends and would be considered discriminatory

g)Cash transactions

This is a crazy suggestion. No words to describe charges for cash deposits.. Obnoxious, sadistic, discriminatory, unconstitutional.

h)Cheque deposit boxes

Another  Sadistic suggestion. “Inconveniencing” customers cannot be an objective of RBI. God save India with such an attitude of the Central Bank

Institutions as Cheque Users


a)charges for cheques

Usurious suggestions. The free float interest on balances is adequate reward for the Bank. The suggestion is anti-consumer.

b)forcing electronic payments

Interfering with contractual relationship of customers with third parties Unethical, illegal and discriminatory. Expanding the ground for Cyber Fraudsters.

c)Charges on Dividend warrants

Another usurious suggestion. Costs will ultimately shift to shareholders. Double charging for dividend warrants is illegal anti-consumer.

d)Charges on cheque receipts

Rubbing salt on the wound on ordinary people.

e)Convenience charges on e payments

No comments

f)cash deposits

Impractical for many businesses. Will promote parallel cash transfer system in private sector.

Government departments / agencies as Cheque Users


a)payment to companies through electronic means

This  infringes on constitutional rights

b) payment to individuals through electronic means

This infringes on constitutional rights

c)Receipts through electronic means

This infringes on constitutional rights

d)Charging government departments

Amounts to robbing citizen’s money indirectly

e)convenience fee on electronic transactions

No comments

f)Tax rebates

Discriminatory and contributing to digital divide


 In view of the above, it is considered that the discussion paper is unconstitutional and against the law and spirit underwhich RBI is governed.

 RBI should immediately withdraw all efforts on “Disincentivisation” of the use of cheques and like in UK provide an open assurance to the public that no such measures will be attempted in future.

 RBI should release a press notification stating that the disincentivisation measure has been withdrawn.

 RBI should initiate an enquiry into whether the release of this discussion paper was influenced by Commercial Banks and Plastic Card suppliers who are the financial beneficiaries of the move and take appropriate disciplinary action.

 RBI should initiate suitable measures to ensure that such blatantly anti consumer measures meant to terrorize the public are not released without adequate internal checks and the signature of the Governor of RBI. 


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