Banks are refusing to show details of gross interest and tax deducted as separate entries in the passbooks of fixed deposit-holders. This amounts to short-changing customers, finds one of our readers, BG Baliga

Core banking has conferred many benefits on customers and the banking system, but some loose ends still need tying up. For instance, some banks are refusing to show details of gross interest and tax deducted as separate entries in the passbooks of fixed deposit-holders. In cases where customers give standing instructions to banks to credit the quarterly interest on their fixed deposits to their accounts, banks like Canara Bank, Dhanlakshmi Bank, South Indian Bank, Indian Overseas Bank, State Bank of Travancore, etc, are no longer showing separate entries in the passbooks. They now show only the net interest.

The standard explanation given is that it would amount to not deducting tax at source. This goes beyond one’s imagination. Don’t they calculate the interest first and then deduct the tax, the entries being made simultaneously? Does this procedure amount to not deducting the tax at source? What harm is there in showing these details in the passbooks as before?  Besides, even now, are they not showing the separate entries in branches that are computerised but have not come under core banking?

 Each depositor would want to know what is the gross earning on his deposits. If there are deductions, he would want to know how much and what for. The depositor has a right to get these details from the banks as and when the entries are made. Banks have a duty to give these to the depositors on the spot. The only practical and efficient way to communicate these details to depositors is through the passbook. But, now, each depositor has to calculate the interest himself, estimate the tax deducted and be satisfied (or not) with the net amount credited.

 Banks are expected to be transparent in their transactions with customers. Where is the transparency here? There is apprehension that banks are short-changing customers with these shortcuts. Core banking cannot override banking transparency and prudent banking practices.

 When the customer wants to calculate his income, the passbook used to be a record of income and tax already paid. When these details are denied in the passbook, he will have difficulty in estimating his annual income and the advance tax to be paid. Even the income-tax officials would not get these details when inspecting passbooks.

 Some bank officials have become so blasé as to reply: “If you want these details you have to ask for them.” No doubt, they will take their own sweet time to reply. In other words, for what used to be given as a matter of routine, they now want customers to appear before them as applicants or supplicants! They would have clean forgotten that deposits form the backbone of banking!

 Banks have not disclosed, until now, who has given this strange interpretation—that giving these details to depositors in their passbooks, as was being done earlier, amounts to not deducting the tax at source. Section 194(A) of the Income-Tax Act relating to this has not changed.

Complaints have now reached the chief general manager, RBI, customer service department, central office, Mumbai. An appeal is pending before the appellate authority, Banking Ombudsman, Mumbai. An earlier appeal was rejected by the Banking Ombudsman, Thiruvananthapuram, as being untenable. No reasons were given.

 Let us wait and see whether these august bodies will now be able to give relief to depositors, or whether depositors have to go to court to get a legal view on customers’ rights vis-à-vis banks and banks’ duties to customers.