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The Politics Of Plastic
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Come to think of it. North Block wants to curb black money; it’s mooted a set of initiatives to boost plastic payments – it’s for tax breaks if you transact through debit and credit cards. And contrary to what some trade bodies will tell you, it’s all for a tax rebate for merchants if at least 50 per cent of the transactions is through electronic means; or alternatively, a 1-2 per cent reduction in value-added tax.
What’s the idea behind all this? Black money has to be, and can be curbed. You get to have an audit trail of transactions; the Centre can use plastic and e-transactions to ensure welfare schemes reach the audience they are targeted at; and plug leakages. And when you mine such data over a period of time, banks, retailers and the taxman can laugh all the way to the bank – for the right reasons.
What’s Sauce For The Goose…
It’s almost a decade since the Reserve Bank of India (RBI) introduced its Know-Your-Customer (KYC). The essence of KYC is that a bank should know you: Who are you? What are you? Why do you do what you do? As a customer that is. Of course, in the process, it did put in a few conditions wherein it became difficult to open a bank account. That was corrected ahead of the launch of the Pradhan Mantri Jan Dhan Yojana. What you can’t get away from (even if it was not overtly stated) is that Mint Road wanted some very clever amongst us to change their way of life, and not continue to laugh all the way to the bank by doing what they were doing – that is by being clever.
Look at the tamasha that’s on in New Delhi. An otherwise sensible voice describes a transaction as a commercial one between two private individuals; what’s the government got to do with all this? It’s not so simple. It does not follow that just because a transaction is conducted or settled in private or that it was routed through banking channels, it’s above board. To better flesh out this point, let’s flashback to the RBI’s mastercircular dated 1 July, 2014 (KYC/Anti-Money Laundering Standards/Combating of Financing of Terrorism/Obligation of Banks under Prevention of Money Laundering Act (2002)
Read this paragraph on politically exposed persons (PEPs); it may be long, but is worth a read.
It says “banks should gather sufficient information on any person, customer of this category intending to establish a relationship and check all information available on the person in public domain. Banks should verify the identity of the person and seek information about the sources of funds before accepting PEP as a customer. The decision to open an account for PEP should be taken at a senior level which should be clearly spelt out in Customer Acceptance Policy. Banks should also subject such accounts to enhanced monitoring on an ongoing basis. The above norms may also be applied to the accounts of family members or close relatives of PEPs and accounts where the PEP is the ultimate beneficial owner. In the event of an existing customer or the beneficial owner of an existing account, subsequently becoming PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the Customer Due Diligence measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis”.
Now let’s go back to the latest set of plastic initiatives. Just about every other payment is sought to be audited now – with the enhanced use of plastic and e-transactions (please see below)
|What’s On The Cards?|
All this is well and good. But what about funding of political parties?! Just look at the transparency guidelines issued by the Election Commission of India (1 October, 2014). It noted that “Concerns have been expressed in various quarters that money power is disturbing the level playing field and vitiating the purity of elections”. Okay, “we all know that” you may say. Read this too. If the expenditure incurred by political parties exceeds Rs 20,000, then payment should be made by cheque, draft and not by cash unless there is a lack of banking facility or towards payment of party functionaries. And that while providing lumpsum amounts to candidates for campaigning during elections, political parties shall not exceed the ceiling prescribed for expenditure by the candidate and that the payment should be made only through crossed cheque, draft or bank transfer.
If the ECI is for transparency, why is North Block mum on the matter in the new payments’ architecture it has imagined for you and I?
Tailpiece: Read the RBI circular on 15 January, 2015 on ‘Foreign Donor Agencies placed in Prior Permission Category’. (It’s on RBI.org.in). Of course, it’s another story!