Venkatesh VT 27 October 2024

Vioalation of statutory regulations by bank and banking ombudsman wrongly supporting bank

Please find the complete details in attachment since i am getting an error when i tried to post it here

Thanks in advance

Venkatesh

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3 Replies

T. Kalaiselvan, Advocate (Advocate) 27 October 2024

It is not opening, you can write it briefly in the next post

Venkatesh VT 28 October 2024

I am reposting my original post here since the attached file may not be opening

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I had opened a normal SB account (not a so called Small acount & no Form 60 )with a private bank by submitting the necessary documents like PAN & AAdhar in Dec 2022.The account was opened with out any issues & i opened few online FDs(more than 50000/ transaction) totalling around 4.6 lakhs in the month of Jan- Mar 2023 ,after the branch manager sent me a WA message regarding higher interest rates being provided by the bank

In the following year i had opened few moreonline FDs totalling around another 3 lakhs((more than 50000/ transaction)

I also got a credit card issued by thesame bank around Jul/Aug 2023 with the same set of documents that i had submitted while opening the bank account in Dec 2022 (though by a different department of the private bank)

How ever in Jan 2024, whne i tried to prematurely with draw my FDs online in Jan 2024, i got a message that there is a lien on my final FD amount of around 100000/ with the lien amount of around 2000/(There was no issue in with drawing rest of the FDs totalling around 7 lakhs).Please note

When i checked with the bank ,the bank manager initially did not know the reason.Aftre few days he informed me that,since my PAN card was not updated, the lien was placed.He also told me that since my original PAN card was damnaged the PAN was not update .I told the manager that i had given all my documents while opening the account & he had never mentioned any thins about damaged PAN card even after opeing the account & hence the bnak is not justified in placing the lien that too with out any notice

The bank then sent a message saying that the lien can be removed either by giving a FD closure letter or submitting my proper Physical PAN card to the branch.When i went to the branch with my PAN card & told him that there is nothing wrong with the PAN card & also told him about the credit card ebing issued with the same PAN card .He then said that his back office will reject my so PAN card.I also told hime that when the GD was opened online there is no justification to ask for written closure letter .He refused to listen & demanded a proper physical PAN card.

Then i found out there were other methods to update the PAN card like SMS.through mobile banking etc.How ever none of them worked & the bank staff were of no help & kept on insisting that i need to submit a new PAN card only

Since i was not happy with the banks response, i approachesd the banking ombudsman who summarily rejected my complaint & sided with the bank

With great difficulty i applied for a reissue of my PAN card which even involved a RTI since my request was repeatedly getting rejected & finally got my e PAN card in Mar/Apr 2024.Whne i sent e PAN (since the physical PAN card was not recieved) to the bank it was again rejected by the bank staff

Luckily i found out how to update the PAN card through mobile banking in Apr 2024 & even confirmation from the bank through SMS & informed the bank about the same.How ever the bank did not remove the lien even after two months & hence i again raised a compliant to Ombudsman asking for a compensation of 1 lakh

After a considerable delay, Ombudsman awarded only a compensation of 10000/ & that for just deficiency of service since the lien was removed after a considerable time & asked me whetehr i am ready to accept it

Since i was not happy about it i searched the internet & found that as per Income tax rule 114 B the bank is not supposed to open a normal banking account with out a PAN card & neither the bank can accept a FD of more than 50000/ or a total FD of 5 lakhs per financial year.I al,so found master circulars by RBI regarding the same addressed to banks

Hence i diagreed with the Ombudsman's award & wrote to the Ombudsman that it is not simple case of defiiciency of service but a violation of statutory regualtions unddr IT rule Sec 114 B(specifically sub rule 2 & 12) & hence the compensation should be enhance to 100000/ & also cancel the order rejecting my first complaint.I also told that the bank has actually conspired aginst me to cover up its mistake & ven tried to blackmail me by puttin gan illgeal line on my FD that too with out a prior notice

How ever the Ombudsman did not agree & passed the final award as 10000/ only with out taking into account about statutory regulation violation under IR rule 114 B which actually covers KYC AML regualtions

Hence i would like to know how i can proceed against the bank & even the Ombudsman (for not taking into account stautory violation by the bank & blindly taking the said e of the bank) in civil/consumer/criminal court so that serious violation done by the bank can be exposed as well as its attempt to cover it up by conspiring & concealing facts & the bank punished apart from getting enhanced compensation.

Thanks for your help in advance

(I am giving below the text of IT rule 114 B as well as master circular of RBI wrt KYC AML compliance )

Section 114 B of IT rules concerning PAN card

Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A

[Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A.

114B. Every person shall quote his permanent account number in all documents pertaining to the transactions specified in the Table below, namely:

TABLE

Sl.No.

Nature of transaction

Value of transaction

(1)

(2)

(3)

Sale or purchase of a motor vehicle or vehicle, as defined in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988) which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles.

All such transactions.

Opening an account [other than a time-deposit referred to at Sl. No.12 and a Basic Savings Bank Deposit Account] with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).

All such transactions.

Making an application to any banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution, for issue of a credit or debit card.

All such transactions.

Opening of a demat account with a depository, participant, custodian of securities or any other person registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).

All such transactions.

Payment to a hotel or restaurant against a bill or bills at any one time.

Payment in cash of an amount exceeding fifty thousand rupees.

Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.

Payment in cash of an amount exceeding fifty thousand rupees.

Payment to a Mutual Fund for purchase of its units.

Amount exceeding fifty thousand rupees.

Payment to a company or an institution for acquiring debentures or bonds issued by it.

Amount exceeding fifty thousand rupees.

Payment to the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) for acquiring bonds issued by it.

Amount exceeding fifty thousand rupees.

[10.

Deposit with,

(i)		banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
(ii)		Post Office.

Cash deposits,

(i)		exceeding fifty thousand rupees during any one day; or
(ii)		aggregating to more than two lakh fifty thousand rupees during the period 09^th November, 2016 to 30^th December, 2016.]

11.

Purchase of bank drafts or pay orders or banker's cheques from a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).

Payment in cash for an amount exceeding fifty thousand rupees during any one day.

12.

A time deposit with,

(i) a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) a Post Office;

(iii) a Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013); or

(iv) a non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.

Amount exceeding fifty thousand rupees or aggregating to more than five lakh rupees during a financial year.

13.

Payment for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007), to a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution.

Payment in cash or by way of a bank draft or pay order or banker's cheque of an amount aggregating to more than fifty thousand rupees in a financial year.

14.

Payment as life insurance premium to an insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938).

Amount aggregating to more than fifty thousand rupees in a financial year.

15.

A contract for sale or purchase of securities (other than shares) as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

Amount exceeding one lakh rupees per transaction.

16.

Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange.

Amount exceeding one lakh rupees per transaction.

17.

Sale or purchase of any immovable property.

Amount exceeding ten lakh rupees or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.

18.

Sale or purchase, by any person, of goods or services of any nature other than those specified at Sl. Nos. 1 to 17 of this Table, if any.

Amount exceeding two lakh rupees per transaction:

Provided that where a person, entering into any transaction referred to in this rule, is a minor and who does not have any income chargeable to income-tax, he shall quote the permanent account number of his father or mother or guardian, as the case may be, in the document pertaining to the said transaction:

Provided further that any person who does not have a permanent account number and who enters into any transaction specified in this rule, he shall make a declaration in Form No.60 giving therein the particulars of such transaction ¹[either in paper form or electronically under the electronic verification code in accordance with the procedures, data structures, and standards specified by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems)]:

Provided also that the provisions of this rule shall not apply to the following class or classes of persons, namely:

(i)		the Central Government, the State Governments and the Consular Offices;
(ii)		the non-residents referred to in clause (30) of section 2 of the Act in respect of the transactions other than a transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of the Table:

²[Provided also that a person who has an account (other than a time deposit referred to at S.No.12 of the Table and a Basic Saving Bank Deposit Account) maintained with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) and has not quoted his permanent account number or furnished Form No. 60, as the case may be, at the time of opening of such account or subsequently, he shall furnish his permanent account number or Form No.60, as the case may be, to the person specified in clause (c) of sub-rule (1) of rule 114C on or before the ³[30th day of June], 2017.] ]

Explanation.For the purposes of this rule,

(1)		'payment in connection with travel' includes payment towards fare, or to a travel agent or a tour operator, or to an authorised person as defined in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);
(2)		'travel agent or tour operator' includes a person who makes arrangements for air, surface or maritime travel or provides services relating to accommodation, tours, entertainment, passport, visa, foreign exchange, travel related insurance or other travel related services either severally or in package;
(3)		'time deposit' means any deposit which is repayable on the expiry of a fixed period.]

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Master circulars of RBI regarding KYC compliance addressed to all banks

RBI/2016-17/183
DBR.AML.BC.48/14.01.01/2016-17

December 15, 2016

All Regulated Entities

Dear Sir/Madam,

Compliance to provisions of Master Direction on Know Your Customer (KYC)

A reference may be made to the following provisions of the Master Direction on Know Your Customer (KYC):

(i) Section 8(d) and (e), wherein it is mentioned that concurrent/internal audit system of the Regulated Entities (REs) has to verify the compliance with KYC/AML policies and procedures and submit quarterly audit notes and compliance to the Audit Committee,

(ii) Section 23, wherein instructions on operation of ‘Small Accounts’ are given, and

(iii) Section 67, wherein it is advised that the Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax (I.T.) Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN. It is clarified that in terms of I.T.Rule 114 B, transactions include opening of accounts with banks, NBFCs, etc;

2. It has been brought to the notice of the RBI that strict compliance with the above provisions is not being ensured in some cases. In view of this, REs are advised as under:

(i) They shall strictly comply with the extant instructions stipulated at Section 8(d) and (e) of the Master Direction;

(ii) In respect of ‘Small Accounts’, the prescribed limits/conditions shall not be breached and compliance therewith shall be strictly monitored. If any customer desires to have operations beyond the stipulated limits, the same shall be allowed only after complying with requirements for opening a normal account including completion of CDD/KYC procedures detailed in Sections 16/17 and provisions of Section 67 of the Master Direction which include quoting of PAN/Form 60 while opening an account with a bank, NBFC, etc. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached

(iii) BSBD Accounts (PMJDY accounts are akin to BSBDAs), which are not KYC compliant accounts are to be treated as ‘Small Accounts’ and are subjected to the limitations applicable to such accounts. Hence, for allowing normal operations in such accounts, the procedures explained at (ii) above are to be complied with. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached.

(iv) In respect of KYC compliant accounts where the required CDD procedure has been complied with, REs shall ensure compliance regarding quoting of PAN/obtaining of Form 60 for all transactions in terms of I.T.Rule 114 B which includes opening of accounts with banks, NBFCs, etc. No debit transaction, transfer or otherwise shall be allowed in accounts which do not comply with the above mentioned requirements. To begin with, this rule shall be strictly applied in accounts where both the thresholds listed below are reached:

balance of rupees five lakh or more; and
the total deposits (including credits by electronic or other means) made after November 9, 2016, exceed rupees two lakh.

3. It is clarified that provisions of Section 67 of the MD are subject to the exemptions granted to Government, Consular office etc., as provided in Income Tax Rule 114 B.

Yours faithfully

(Lily Vadera)
Chief General Manager

Top

2016-17/135
DCM (Plg) No.1287/10.27.00/2016-17

November 16, 2016

The Chairman / Managing Director/Chief Executive Officer
Public Sector Banks / Private Sector Banks/ Foreign Banks
Regional Rural Banks / Urban Co-operative Banks / State Co-operative Banks

Dear Sir,

Withdrawal of Legal Tender Character of Specified Bank Notes –
Compliance with provisions of 114B of the Income Tax Rules, 1962

Please refer to our Circular DCM (Plg) No.1226/10.27.00/2016-17 dated November 08, 2016 on the captioned subject. With a view to ensure compliance with provisions of 114B of the Income Tax Rules, 1962, the banks are advised as under:

Anybody depositing more than ₹ 50,000/- in cash in their bank account has to submit a copy of the PAN card in case the bank account is not seeded with PAN
In addition to the above provision, in the same IT Rules, PAN reporting requirements are there for other transactions, which banks need to insist upon.

2. The banks are, therefore, advised to take note of the above and ensure strict compliance with the provisions of 114B of the Income Tax Rules, 1962. Relevant provision 114B of the Income Tax Rules, 1962, is enclosed.

Yours faithfully,

(P Vijaya Kumar)
Chief General Manager
Encl: As above