The data breach at 19 Indian banks that has led to more than 32 lakh debit cards being blocked or recalled is a wake-up call for the banking industry.
While the actual number of complaints received so far, 641, and the sum of money that appears to have been fraudulently withdrawn, Rs.1.3 crore, are both small relative to the scale of the potential data theft, it is disconcerting that it has taken almost six months for the system to officially acknowledge the incidents and initiate steps to address them.
It is all the more galling since the Reserve Bank of India and its top officials have been urging bankers for quite some time to accord urgent priority to cyber security.
A private bank appears to have been a point of entry for the data criminals who, according to reports, may have infiltrated using malware at ATMs operated by a third-party payment services vendor.
The National Payments Corporation of India has been coordinating investigations into the incident, and a forensic audit is expected to reveal preliminary findings soon.
For the government and the banking regulator, much is at stake as the two have sought to move in concert to harness the digital revolution to advance socio-economic policy objectives.
These include increasing financial inclusion, better targeting of subsidies through the direct benefit payments model, improving economic efficiency by lowering transaction costs, and moving toward a cashless economy so as to reduce the circulation of black money and curb tax evasion.
Payment systems are the plumbing of the financial system; so long as there is no leakage or clogging, we are unaware of their functioning. But when they do back up, the situation becomes catastrophic quickly
With banks in India having embraced technological change, the onus is on them to integrate inter-generational legacy systems across branches, ATMs and online banking networks into one seamless and secure whole.
The Carbanak cyber gang’s coordinated and widespread attack, which is estimated to have cost about 100 financial institutions worldwide $1 billion, revealed that today’s criminals are using more and more sophisticated tools to access computer systems at banks.
As these may gestate for several months before manifesting themselves, banks can ill-afford to be complacent and approach incidents such as the latest debit card data breach with band-aid solutions.
Top managements at lenders should reappraise their cyber culture, heed warnings and alerts promptly, and address shortcomings.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.