Carrying plastic money is a convenience that many of us have got used to. But, there is too much risk attached to it, given the fragility of electronic security and the poor billing systems of almost every issuer. An e-wallet or stored-value card, which can be topped up (like putting money in your wallet), is an ideal way to mitigate the higher risk attached to credit or debit cards. For instance, you can have a Rs1,000 card and use it for small purchases such as books, flowers and movie tickets. Even if the card is lost or hacked, your loss is limited to the cash stored on the card. Despite the obvious convenience, only a few e-wallets exist in India. They are running low-key operations because there is no clarity on e-wallet regulations. The Reserve Bank of India (RBI) is the designated regulator under the Payment & Settlement Act, which was finally notified in 2008. It has permitted some e-cards to function (Itz Cash is one such) and disallowed others, most notably TimesofMoney’s Wallet365, which was launched with great fanfare by superstar Amitabh Bachchan in 2006.
According to the RBI deputy governor in charge, Wallet365 was barred because its settlement methodology was deemed akin to ‘acceptance of deposits’ by a non-banking entity. Also, it needed a commercial bank to provide settlement and clearing. This fell foul of a circular issued after it was launched. On the other hand, Itz Cash is allowed to operate on ‘interim approval’ allowing it to grab new business opportunities such as the silver card for octroi payments. Our key concern is that, in the absence of regulation, e-wallets or e-cash has no Know Your Customer (KYC) requirement which is contrary to the stringent government policy on most transactions. RBI does not say why Itz Cash is allowed to flourish on ‘interim approval’ while Wallet365, which used the banking settlement channel (safer from the security perspective or in tracking unaccounted money), was forced to perish. More importantly, why were banks, which already follow KYC rules, barred from launching e-cards with similar ‘interim approvals’? Hopefully, the guidelines will be issued and applications processed soon to give customers safer and better options for electronic purchases.
Last fortnight, we wrote about how RBI’s Hyderabad office had alarmingly supplied fake notes of Rs17,000 to ICICI Bank’s currency chest in the city. This is a serious scandal, far bigger in consequence than the fact that fake currency was discovered in the currency chests of several banks in Uttar Pradesh. But what should have been a major scandal has been successfully buried due to media apathy or understanding of such issues. Senior bankers are shocked but also gleeful, because RBI has never hesitated to crack down hard on their lapses. What action has RBI taken against those responsible? More importantly, what corrective measures has it initiated? In a delicious irony, we found a media report which said, “Alarmed at the rising incidence of fake currency notes in the country, the RBI has launched a unique initiative – schoolchildren will help fight the menace.” Clearly, the matter is far too serious right now to be confused with PR exercises such as sensitising children about fakes.
RBI has now provided us details about the Hyderabad incident. It says that 28 pieces of bank notes valued at Rs15,300 (we had reported Rs17,000) were counter-feit, out of a consignment of 25 lakh pieces valued at Rs90.50 crore. RBI has also filed an FIR against those responsible for the lapse, as required by law. In an answer to our query on systemic changes to plug the problem, RBI has said that it uses note sorting machines (NSM) for eliminating soiled and fake notes. However, the lapse occurred because currency notes received at the RBI counter are not checked by an NSM machine. RBI has not initiated action to eliminate human error by installing NSMs at all RBI counters, as is required by bank currency chests. The machines are also being deployed at “select sensitive bank branches (based on their proximity to international borders, higher counterfeit detection and those having high cash handling requirements) to detect and curb circulation of counterfeit notes.”
Media: Drastic Action Needed
Along with realty, the big media boom was one of the bubbles of the five-year monster bull run, which ended at the start of 2008. It has taken almost a year for the industry to feel the effects. But big plans, announced by listed, unlisted and private-equity-funded media companies are unravelling rapidly. It started with the exit of Kunal Dasgupta from Sony Entertainment Television after having survived several near-exits in the past.
Then the much-hyped INX Media, which has been on a spending binge and made news for its high-profile spats with the editorial staff, began to fall apart. First the news channel, 9X News, was spun off. More recently, Indrani and Peter Mukherjea have agreed to step down. This is probably the first case in India where private equity investors have asked promoter-shareholders to get out of the management. They have brought in an advisor. Many think it is too little and too late to salvage INX and the private equity investors know it. However, they have appointed a chief financial officer (CFO) to verify the group’s finances before deciding whether to pull the plug. Another round of funding seems unlikely and there are reports that Peter Mukherjea has already lined up alternative employment. This turmoil has not stopped Congress leader Margaret Alva’s sons from launching a new channel, Real, in collaboration with Turner Corporation. Its launch TRPs were disappointing. But such is its clout that the normally nonchalant media buying companies are willing to wait and watch how it shapes up.
However, the media house to really watch is Bennett, Coleman & Co. The market leader is usually the first to identify trends and implement drastic course corrections. This time, it has suffered multiple blows: costs of a huge expansion in multiple media segments that are still loss-making and a simultaneous slowdown in its two revenue earners – advertising and private equity deals. The group is furiously cutting costs on all fronts. It is shedding staff, has effected ruthless pay-cuts (even rolling back increments), is closing unviable businesses, has sold some assets and investments and is also pre-paying hundreds of crores of loans to reduce the interest burden. At the same time, it insists that some projects, such as ET Now, will be launched as scheduled.
If Bennett, the most profitable media group in the country, feels the need for such drastic cost cutting, it is safe to say that others need even more severe and urgent action. But most listed media companies, fed on multiple rounds of easy equity funds, are still unwilling to see the writing on the wall. While they admit to tough times, there is no sign that they are preparing for leaner and meaner times in order to protect investors’ money.