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Digital: The new normal of banking industry

Banks should consider promoting contactless and digital payment options and minimising use of instruments/ processes which would require contact for transactions as part of business continuity measures.

Kritika Krishnamurthy and Rajiv Mohapatra

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Digital: The new normal of banking industry

The coronavirus (Covid-19) outbreak has snowballed into a major global crisis causing immense personal and financial suffering for consumers, communities, and businesses. The banking industry, in addition to facing its own challenges, is expected to help customers in this hour of need. While banks have welldefined business continuity plans, it is time for banks to visualise and brainstorm whether they are adequate to “continue business” in the middle and long term.

The fundamental keystone for banking customers is trust and reputation. With the crisis, these terms have gained new and expanded meaning. The current crisis is a grave challenge, the response to which will have a lasting impact on their longterm performance, success, and market positioning. Presently, the focus of banks and NBFCs is on the short-term firefighting related to moratorium and loan defaults. But as the lockdown ends, the new normal of everyday living is going to emerge where people shall still be hesitant to step out of their homes unless really necessary.

This is where the digital banking services and payment systems offered by banks shall emerge as game changers. A fundamental shift in customer behaviour is expected in the banking sector a decrease in the physical branch visits is certain with an immediate increase in online transactions, peer-topeer payments, wallet usages, etc. The countries with the earliest impact of the virus China and Italy have already seen a 20% increase in online transactions.

Similarly, of 17,000 people from 19 countries interviewed by Mastercard, 46% have swapped out their top-ofwallet card for one that offers contactless transactions this proportion climbs to 52% among those under 35 years old because it is a cleaner way to pay and the speed of tap and pay enables customers to get in and out of stores faster.1 In a recent deliberation organized by Bridge Policy Think Tank India, non-banking finance companies and fintechs acknowledged that these new age consumers are the most sustainable and conscious customers they have and they intend to market their products to them more frequently.

It is up to the banks now to step up their game to convert more of these experiences into positive stories for long-term digital adoption. For India, the problem begins not from the micro but the infinitesimal or diminutive level. High personal interaction and use of ‘paper only’ services have been the norm plaguing many parts of the banking services. For example, it is still not possible to open a business bank account in India or undertake a high value RTGS transaction without tendering a cheque from an existing bank account.

Wire transfers by businesses require paper documentation and declarations possible only after visiting the bank branch. Company incorporations and other services still insist on a physically‘“stamped’ bank statement. Many current accounts opened by banks just before the outbreak are still not functional just because the banks make accounts functional by servicing a ‘kit’ including debit cards, cheque book, banking passwords and account details.

This is sent to customers through courier services which is not reaching customers because of the lockdown. Payments to informal sector is disrupted because despite payment aggregator advertisements showing payments to nanny using a digital platform, in the real India, most informal sector workers such as maids, drivers, nannies etc. still do not have bank accounts in their name. Most small businesses like a flower vendor supplier for weddings or a vegetable vendor accepts payments only in cash.

Like always, ATMs in India have gone dry because it is becoming difficult to reload cash in lockdowns. It is important for the industry to wake up to the fact that these problems are not going to go away. They are here to stay and need to be addressed for banking services to kickstart again. Transactional banking is becoming the norm, where banks offer simple and transparent fees for sending and receiving customer funds, as opposed to traditional banking options provided by legacy institutions.

In the post-Covid world, the race is on to offer businesses and HNWIs robust and cost-effective banking. Banking that is safe, tax efficient and truly global. Digital banks are emerging as an option to the traditional banks. There are many similarities between the leading digital banks EQIBank, Monzo, Revolut, N26, Starling, Moven, Simple and Chime have all created compelling brands, interesting apps, innovative UI/UX and streamlined services.

But there are differences, Monzo, Revolut, N26, Simple and Chime are focused on banking retail clients and SMEs in the onshore markets. On the other hand, EQIBank focuses on the needs of corporate and private clients and provides services to over 180 countries across the globe. EQIBank is said to have seen a dramatic increase in accounts during the quarantine period as people reassess their relationship with their banks. 

Some banks in India have been proactive in this regard. Some existing products include Kotak 811 and Axis Bank ASAP. For example, ICICI has launched a digital banking platform‘“ICICI Stack’ a set of comprehensive digital banking services and APIs (Application Programme Interface) including digital account opening, loan solutions, payment solutions, investments, insurance and care solutions.2 But the banks need to ask themselves if this will be enough to compete with digital banks which offer‘“no linesno paper services’.

Similar rethinking is required in the case of payment systems. In Europe, Mastercard is leading the contactless payment revolution with 75% of its existing payments already contactless and plans to increasing contactless payment limits across Europe.3 In countries like the Netherlands where lockdown restrictions are being eased and even schools being reopened, banks are reportedly encouraging customers to make contactless payments in stores with no requirement for a PIN. Media reports state that for small contactless payments, i.e. up to €25, customers will not have to touch the payment terminal. 

The initiative will also see the increase in the cumulative limit for contactless payments with a debit card from €50 to €100. In India, the Reserve Bank of India (RBI) has allowed tap and pay contactless payments without any PIN, for up to INR 2000 since 2015. It is prudent now to increase the limit for contactless payments in light of the pandemic. RBI had also in the past released guidelines on tokenisation for debit/ credit/prepaid card transactions in January 2019.

This involves a process in which a unique token masks sensitive card details. Thereafter, in lieu of actual card details, this token is used to perform card transactions in contactless mode at Point of Sale (POS) terminals, Quick Response (QR) code payments, etc. and can work well in post pandemic world too. However, in January 2020, the RBI has asked banks and other card issuers to only provide optional contactless payment options over security concerns, which has been extended till mid of June due to Covid-19 pandemic.

It is only when a user proactively requests for contactless payments on its cards that the facility shall be allowed.4 As a consequence, most payment cards in India may not be available by default, for tap-to-pay. In the present scenario however, pushing for tap to pay, QR Code, card not present transactions shall become imperative. Banks should, in fact, consider promoting contactless and digital payment options and minimizing use of instruments/processes which would require a contact for transactions, as part of their business continuity measures.

At the same time, banks shall also have to devise appropriate fraud and cyber security controls. At the Asian Credit Risk Colloquium 2020, cyber security expert Durga Dube, head of Cyber Security and Information Management Risk, Reliance Industries, spoke of how cyber security is one of the top five risks from the lens of a global perspective along with climate change and poverty.

He further pointed out that a vulnerability or breach in the system of one bank can cause all other operators in the network including wallets, payment systems and supporting fintechs. The pandemic has pushed the envelope for a lot of the sectors. Even the courts which were unconvinced for so many years finally went online reluctantly. Companies are re-thinking work from home.

The government is also considering creating policies around the work from home framework. Problems in farm to market transfer of perishables came to limelight despite being a neglected problem for decades. Loopholes in direct benefit transfers became more pronounced with the Purulia ration card mortgage problem. It is time that the banking and finance sector too accept that all will never go back to the way it once was. It is time to embrace the new normal and start preparing for it. (Endnotes)

1. https://www.finextra. com/newsarticle/35732/ covid-19-spurs-contactlesspayments-takeup—mastercard

2. https://ibsintelligence. com/ibs-journal/ibs-news/ icici-bank-launches-its-digital-banking-platform-inthe-wake-of-covid-19/

3. https://ibsintelligence. com/ibs-journal/ibs-news/ mastercard-increases-contactless-payment-limitsacross-europe-amidst-covid-19/

4. Reserve Bank of India Notification no. DPSS.CO.PD No.1343/02.14.003/2019-20 dated January 15, 2020 Kritika Krishnamur thy, Founding Partner at AK and Partners and Rajiv Mohapatra, Director & Senior Counsel Regulatory Affairs (Asia Pacific), Mastercard.

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Legally Speaking

GAUHATI HIGH COURT QUASHES NO-CONFIDENCE MOTION AGAINST GRAM PANCHAYAT PRESIDENT CITING PARTICIPATION OF MEMBER DISQUALIFIED FOR HAVING THREE CHILDREN

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The Gauhati High Court in the case Jugitawali Pawe v State of Assam and 15 ors observed and quashed a resolution expressing no-confidence in the petitioner – the President of a Gram Panchayat, as a result of which she as removed from office. It was stated that it is as per the citing no compliance with Assam Panchayat Act, 1994, reading with Rule 62 of the Assam Panchayat (Constitution) Rules, 1995.

It was preferred by the petitioner to the materials available on record to argue that one of the members of the Gaon Panchayat, the respondent. The respondent voted against the petitioner and had given birth to her third child the previous year. Moreover, by virtue of Section 111(2)(a) of the Assam Panchayat Act, 1994, reading with Rule 62 of the Assam Panchayat (Constitution) Rules, 1995, the petitioner stood automatically disqualified on the date of voting. Following, which her vote was taken by passing No-confidence motion.

It was prayed by the petitioner in the plea for setting aside the impugned resolution and for issuance of a direction to restore his client back in the office. Thereafter, to initiate fresh proceedings, liberty should be granted to the respondent, following the due process.

It was agreed by the Counsel representing for the respondent that the said member of the panchayat had been disqualified but retained on the ground that the disqualification would have no bearing on the petitioner’s case, as the impugned resolution was passed before the declaration of petitioner disqualification.

In the present case, It was noticed by Justice Suman Shyam the member had voted against the petitioner and without her vote. The petitioner would not have been ousted from office. Justice Shyam also found no dispute about the fact that the member had incurred disqualification under the law prior the date of adoption of the impugned resolution. Justice Shyam found it unnecessary to delve into other aspects of the matter which includes the procedural formalities for declaring the member a disqualified candidate.

It is observed that the impugned resolution was declared to be vitiated and liable to be set aside. Further, the Court restored the petitioner to the office of the President of the Bongalmara Gaon Panchayat with immediate effect and it was stated by the court that the order will not stand in the way should the authorities or any member of the Gaon Panchayat propose a fresh motion of “no-confidence” against the petitioner and the due process of law needs to be followed.

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Halt DDA’s demolition action against jhuggis in Nizamuddin’s Gyaspur area, orders Delhi High Court

As per the JJ Rehabilitation and Relocation Policy 2015 and the Delhi Urban Shelter Improvement Board, the residents who can establish their residence prior to 01.01.2015 are eligible for rehabilitation under the JJ Rehabilitation and Relocation Policy 2015.

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plea in Delhi High Court seeking repatriation of 56 pregnant nurses

The Delhi High Court in the case Manoj Gupta & Ors. v. DDA & Ors observed and has ordered status quo on the Delhi Development Authority’s proposal to demolish jhuggi clusters in city’s Gyaspur area in Hazrat Nizamuddin. The vacation bench comprising of Justice Neena Bansal Krishna observed in the petition filled by the residents and the court granted an interim relief.

It was ordered by the court status quo till July 11, the next date of hearing.

The bench orally remarked that a ten-day delay in demolition won’t make a difference but if today it is demolished and later, we come to know that they were entitled, who’s going to… the bench will consider it on July 11, 2022 but in the Meanwhile, some protections are entitled them. Adding this, Status quo be maintained. If since 1995, they have been there, heavens won’t come down if for 10 more days they are protected.

In the plea the petitioner stated that the T-Huts settlement in the area, which was stated by the authorities to vacate. It has been in existence for almost two decades and compromise of 32 jhuggis or households.

In the plea it was alleged that the bulldozers have been parked around the camp and a DDA official has orally asked them to vacate the area and it is noted that till date no proper notice have been sent to them nor has DDA conducted any survey of the area.

Furthermore, the DDA did not provide any alternate arrangement for their rehabilitation which resulted in extreme distress among the residents.

Moreover, it was admitted by the petitioner that the land in question belongs to DDA and they may seek that status-quo to be maintained at the site. It was urged that the residents should not be physically dispose or evicted from the demolition site until the survey is conducted and rehabilitation is provided to the residents as per the DUSIB policy of 2015.

As per the JJ Rehabilitation and Relocation Policy 2015 and the Delhi Urban Shelter Improvement Board. The residents who can establish their residence prior to 01.01.2015 are eligible for rehabilitation under the JJ Rehabilitation and Relocation Policy 2015.

It is observed that in the case Ajay Maken v. Union of India, Reliance is placed on the Supreme Court decision and the High Court decision in the case Sudama Singh & Ors. v. Government of Delhi & Anr, it was held in the case that that removal of jhuggis without ensuring relocation would amount of gross violation of Fundamental Rights under Article 21 of the Constitution. Further, it was held that the agencies conducting the demolitions ought to conduct survey before undertaking any demolition.

It is submitted that these observations would apply across the board, in the entire NCT of Delhi.

Advocates Vrinda Bhandari, Shiyaz Razaq, Kaoliangpou Kamei, Jepi Y Chisho and Paul Kumar Kalai, represented the petitioner.

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TELANGANA HIGH COURT: PLACE OF RESIDENCE OF THE ARBITRATOR WOULD NOT BE THE SEAT OF ARBITRATION

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The High Court of Telangana in the case M/s S. Square Infra v. Garneni Chalapathi Rao observed and held that the place of residence of the arbitrator would not determine the seat of arbitration.

The Single bench comprising of Justice P. Sree Sudha observed and held that merely because an arbitrator residing in Hyderabad has been appointed, it does not mean that only the Courts at Hyderabad would have the jurisdiction to decide all the matters arising out of arbitration agreement.

Facts of the Case:

In the present case, after the dispute arouse between the parties, the respondent sent a letter to the petitioner for nomination an arbitrator who is residing in Hyderabad. To its said notice, petitioner replied and declined the appointment of the arbitrator for the reason that there was no dispute which required the appointment of an arbitrator.

A suit was filled by the respondent before the VII Additional District Judge Sangareddy, seeking for relief of permanent injunction. An application was filled by the petitioner under Section 8 of the Arbitration & Conciliation Act and the parties referred to the arbitration.

An application was filled by the respondent under section 9 of the Arbitration & Conciliation Act before the Principal District Judge, Sangareddy, Subsequently, an application was filled by the petitioner for transferring the application from the Court at Sangareddy to Court at Hyderabad.

Contentions made by Parties:

On the following grounds, the petitioner sought the transfer of application.

An arbitrator residing in Hyderabad was nominated to respondent. However, only the courts in Hyderabad would have the jurisdiction to decide all the matters arising out of the arbitration.

It was stated that the nomination of an arbitrator residing in Hyderabad amounted to designating Hyderabad as the Seat of Arbitration.

On the following grounds, the respondent countered the submissions of the petitioner:

An application was filled by the petitioner under Section 8 of the A&C Act before the Court at Sangareddy. However, in terms of Section 42 of the A&C Act, only the court at Sangareddy would have the jurisdiction to decide all the matters arising out of arbitration.

Court Analysis:

The Court held that the seat of arbitration would not be decide by the place of residence of the arbitrator.

The argument of the petitioner was rejected by the court that since the respondent had initially nominated an arbitrator residing in Hyderabad, the Hyderabad Court would have the jurisdiction.

The court stated that merely because a party has nominated an arbitrator who resides in Hyderabad, the same would not designate Hyderabad as the Seat of arbitration in absence of any designation of the seat under the arbitration agreement.

It was further stated by the court that the application filled by the petitioner filled under Section 8 application before the Court at Sangareddy consequent to which the parties were referred to arbitration. Therefore, the Court would have the jurisdiction, in terms of Section 42 of the A&C Act.

The Transfer petition was dismissed by the Court.

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DELHI HIGH COURT REMANDS IN THE MATTER BACK TO ASSESSING OFFICER AFTER SETTING ASIDE: JUST 3 DAYS’ TIME GRANTED TO RESPOND TO THE INCOME TAX NOTICE

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plea in Delhi High Court seeking repatriation of 56 pregnant nurses

The Delhi High Court in the case Shubham Thakral Vs ITO, the Delhi bench comprising of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed and remanded the matter back to the assessing officer as just 3 days’ time was granted to respond to the income tax notice.

In the present case, the petitioner/assessee assailed the notice under Section 148A (b) of the Income Tax Act, 1961 and the order passed under Section 148A (d) for the Assessment Year 2018–19.

It was contended by the assessee that only three days’ time was granted to the assessee to respond, as against the mandatory statutory period of at least seven days. However, despite of the fact that the annexure attached to the notice gave the petitioner eight days to respond, the e-filing submission portal was closed earlier, in violation of Section 148A (b) of the Income Tax Act.

Furthermore, the petitioner relied on the decision of Delhi High Court, in the case of Shri Sai Co-operative Thrift and Credit Society Ltd versus ITO, the Delhi High Court in the case held that under Section 148A (b), a minimum time of seven days has to be granted to the assessee to file its reply to the show cause notice.

No objections were raised by the department/respondent to the matter being returned to the Assessing Officer for a fresh decision in accordance with the law. Accordingly, the court set aside the order passed under Section 148A (d) for the Assessment Year 2018-19. The Assessing officer was directed by the court to pass a fresh reasoned order in accordance with the law after considering the reply of the petitioner, which was directed to be filed within a week.

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ALLAHABAD HIGH COURT: ADVOCATES SHOULDN’T ADVISE CLIENTS TO REAGITATE MATTERS IF THERE IS NO ERROR APPARENT ON FACE OF RECORD

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The Allahabad High Court in the case Malhan and 17 Others Vs. State Of U.P. And Another observed and stated that an advocate should be given such a piece of advice when there is no error apparent on the face of the record nor was there any reason why the matter be re-agitated it was finally decided.

The bench comprising of Justice Dr. Kaushal Jayendra Thaker and Justice Vivek Varma observed while dealing with the civil review application wherein the bench observed the concerned advised his client to make a chance by filling the instant review application after a period of six year.

In the present case, a civil review petition was filled along with the application under section 5 of the Limitation Act, 1963., the application was filled for seeking condonation of delay in filling the application, the application was filled with a delay of six years i.e., 1900 days.

It was stated by the applicant that the review application could not be filled due to the blockage of public transportation on account of the COVID-19 guidelines.

Moreover, the court observed that the appeals were disposed of by the Apex Court in the year 2016 and only in 2020-2021, the pandemic struck India and furthermore, it cannot be said that due to the COVID guidelines the public transportation was blocked and however, the applicant could not come to Allahabad Court to file review.

Further, it was stated that the court asked the counsel for the review applicants to explain the delay in filling the review application, to which the council gave a strange reply that the counsel had advised the clients that they must take a chance by filling this review application after a period of six years.

Following this, the Court observed:

The court noted that an advocate should not give such an advice when there is no error apparent on the face of record nor was there any other reason that when the matter was finally decided, why the matter be re-agitated.

It was stated that the court has no reason to condone the delay of six years as the same was not explained as to why this review application is filed after such an inordinate delay.

The Court opined that the lapse in approaching the court within the time is understandable but a total inaction for long period of delay without any explanation whatsoever and that too in absence of showing any sincere attempt on the part of suiter, this would add to his negligence and the relevant factor going against him.

The court observed that careless and reckless is shown by the review applicant in approaching the court and due to the condemnation of delay in the application with a token cost of Rs.10,000/, the court dismissed the application.

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SUPREME COURT CRITICISES HIGH COURT: POSTING ANTICIPATORY BAIL PLEA AFTER TWO MONTHS CAN’T BE APPRECIATED

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The Supreme Court in the case Sanjay versus The State (NCT of Delhi) & ANR observed and stated that in the case where personal liberty is involved, the court is expected to pass orders at the earliest while taking into account the merits of the matter in one way or other. Further, the top court observed that posting of an application for anticipatory bail after a couple of months cannot be appreciated by the court.

The bench comprising of Justice C. T. Ravikumar and the Justice Sudhanshu Dhulia was hearing a June 2 SLP against the Delhi High Court in a petition filed under section 420, 467, 468, 471, 120-B, 34 of the Indian Penal Code, 1860 for seeking anticipatory bail in a 2022 FIR, a notice is issued. It was stated that the learned APP for the state is present and accepts the notice and seeks time to file status report. The High Court in the impugned order stated that Let the status report be filed by the state prior to the next date with an advance copy to the learned counsel for the petitioner. The matter is to be list on 31.08.2022.

It was noted by the bench comprising of Justice Ravikumar and the Justice Dhulia that in the captioned Special Leave Petition, the grievance of the petitioner is that the application for anticipatory bail moved by the petitioner, being Crl. M.A. No. 11480 of 2022 in Bail Application No. 1751 of 2022 without granting any interim protection, was posted to 31.08.2022. on 24.05.2022, the bail application was moved on.

However, the bench asserted that the bench is of the considered view that in a matter involving personal liberty, the Court is expected to to pass orders at the earliest while taking into account the merits of the matter in one way or other.

It was declared by the bench that at any rate posting an application for anticipatory bail after a couple of months cannot be appreciated by the court.

Further, the bench requested to the High Court to dispose off the application for anticipatory bail on its own merits and in accordance with law expeditiously, preferably within a period of three weeks after reopening of the Court. Adding to it, the bench stated that if the main application could not be disposed off, for any reason, within the stipulated time, relief sought for in the interlocutory and on and on its own merits, the application shall be considered.

While disposing of the SLP, the bench directed in its order that we grant interim protection from arrest to the petitioner herein, Till such time.

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