An Indian is now top banker

Vikram Pandit, is the youngest person to become the CEO of Citigroup. A master in electrical engineer by degree, Vikram switched to the financial field to make a mark in Morgan Stanley. A year ago, Vikram had founded Old Lane, a hedge fund focused on real estate and infrastructure opportunities in India, right after leaving the top executive position at Morgan Stanley. Citigroup later bought out the company (for a whopping $600 to $800 million) to offer the key people in Old Lane jobs in Citigroup’s Alternatives business. And within six months, Vikram got the CEO’s position at Citigroup. The 50-year old Indian, has certainly made India proud.

Other-bank ATM transaction fees got lower

The Institute for Development and research in Banking Technology (IDRBT) recently announced that it has removed the inter-bank ATM switching fees. What this means is that when you transact at an ATM that is not owned by your bank ("other-bank" ATM), your bank saves the two Rupees per transaction it would otherwise had to pay to IDRBT to connect to the other bank's infrastructure. So the direct benefit is to the bank. We can now expect this benefit to pass on to the customer, by way of reducing the inter-bank ATM transaction charges. Also, banks with a smaller ATM network can also join the Switch enjoying lower transaction fees for its customers.

Good news for Bank Customers

The RBI has now decided to intervene in the recovery formula of banks - a system that concerns people who have taken bank loans more than their repayment worries. RBI feels that the system could risk the reputation of the banking sector as a whole. Therefore, banks are now urged to follow prescribed specific considerations, which currently are in the making, while engaging recovery agents.

Post this regulation, if found that recovery agents are harassing customers, Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period; and can also attract penalties against any bank or its Directors/ Officers/ agents in this regard.

While these guidelines are in draft, customers can also give their feedback on the same to RBI.

Customer Satisfaction lower in metros

Recently, McKinsey & Co. released a study on the Indian Banking System. According to the study, the IT effectiveness of some leading Indian banks is better than that of banks abroad.

The study also finds the level of customer satisfaction in Indian metros is lower than that in rest of Asia. Banks' IT infrastructure in the past year has been focused on implementing Know Your Customer (KYC) as per Basel II guidelines. So does the 'effective IT infrastructure' fall back on satisfying Indian customers? Or do Indians (in the metros) demand 'something more' out of banks that the banks aren't (yet) able to deliver?

Is Insurance a Savings Instrument?

An increase in the disposable income of Indians has led to an upswing in the lifestyle of people. A growing need for insurance has also been observed, as more families are dependent on only one earning member.

There are two types of life insurance - term plans, which are the simplest and cheapest form of risk cover, and savings based plans, where one can expect returns after a period. The number of savings based plans have recently been on the increase.

People are viewing it as an investment instrument; like market-based Unit Linked Insurance Plans (ULIP) as equivalent to another Mutual Fund. But it is not entirely their fault. Insurance Advisers are 'misguiding' them into buying these savings based plans as investments with an added benefit of risk cover, instead of the other way round.

However, consumers need to keep in mind that most of these plans are beneficial (both risk-cover as well as returns wise) only in the long term, though most insurance agents push them as only a 'three-year' investment. Incidentally, neither ULIPs nor Mutual Funds 'guarantee' returns.

An ideal way of insuring, as most financial planners would put it, would be to buy simple term plans for life risk cover and diversified investment of the rest of the savings in other instruments like mutual funds, public provident funds, and bank deposits.

Who's guarding your ATM?

ATMs are now the most used touch-point between the bank and the customer. The security measures at an ATM are far lesser than that found at a bank branch. ATMs are equipped with either a camera or a watchman, and rarely both, let alone any additional measures. This brings us to the question, that as an individual, is transacting at ATMs really secure?

Complex frauds like card swapping and card jamming are unheard of in India. The first few things that come to the mind on ATM frauds are card theft, PIN theft and mugging.

Unlike in case of credit cards, ATMs need a two factor authentication (1: the card, and 2: the PIN or any biometric identification) to operate. A two factor authentication is necessary for added security. PIN thefts are formed mostly out of customers casually disclosing the said code to, say, drivers or relatives to withdraw money for them. The bank pretty much cannot control these factors - these are left for the consumer to handle. Banknet's Report on the Indian ATM Industry has mentioned a few tips on how to prevent such frauds and other precautionary measures to be taken while at an ATM.

Still, robbing or mugging leaves some fraud issues unanswered. Hiring guards has been generating controversy. It is observed that customers usually ask these guards for assistance in case they face any problems. This tempts banks to train these guards to help such customers in need. However RBI feels that these 'self-service' terminals should not involve assistance from any such 'third parties' who may themselves stand as potential threats to customer safety.

Tell us what you think. Do we need guards at ATMs? If not, what should be the solution?