Are banks resorting to some creative accounting during the Corona crisis? Hi friends,
Have you guys noticed anything funny with your recent bank statements? Please do check!
Here are a couple of strange things (all started with the lockdown) that I've noticed with my recent IDBI bank statements :
1. A series of phantom interest incomes (with corresponding TDS) for FDs were reported in the March 2020 e-Statement (so, logically, should also appear in the Q4, 2019-20 TDS Certificate). These were not actually due, and were not paid/compounded in reality either, but were reported all the same!
It appears that some creative accounting was done for some reason, reporting some as-yet-unpaid interest amounts in the FY 2019-20, while the actual interest payments are apparently to be made in the next Financial Year, i.e. 2020-21. A part of these was in fact paid in April-20 (but reported in March-20)! I don't know what the bank expects to gain from this!
Apparently these are not just some one time "mistakes", because funny accounting keeps going on with each subsequent monthly statement starting with March-20! e.g.
2. I happened to notice that for my FDs with the bank, the May '20 instalments of the quarterly interest payments (pre-TDS) fell short of the expected amounts by some margin, and the TDS % applied were all over the place, -- anywhere between just over 7% to just over 9% ! Why on earth?!!!
Then I realized that I could perhaps explain at least this part of the funny accounting!
Remember that the government had proposed to temporarily reduce the TDS rate on bank interest incomes to 7.5% (from 10%) as part of their Corona relief package. Apparently the implications of this announcement were not thought through! I'll explain why I think so.
Please understand the bank's predicament: if they had compounded the actual quarterly interest due, less the reduced (7.5%) TDS, they would have had to pay me interest on this additional 2.5% un-deducted TDS part also, -- at the originally contracted rate, which was at least 3% higher than the current rate! So what does the poor bank do?
Clever bank! -- They've fudged the numbers to reduce the pre-TDS interest payments to something less than the actual amounts due, and then ensured that the post-TDS interests credited to my accounts remained still roughly the same as what I would have received in the usual course (with 10% TDS), so I'm likely to overlook the funny accounting!
Thus, rather than passing on the benefits of the promised reduction in the TDS rate to the customer, the devious bank has in effect temporarily pocketed themselves the shortchanged interest amounts (enabled by the reduced TDS rate) in the form of an interest-free loan! I expect them to pay me back the shortfall amounts, without interest compounding, at the end of the FY.
My letters (and reminders) to the bank demanding explanation in this regard have so far garnered nothing in almost three weeks now!
I don't know if other banks are doing something similar as well. If so, I don't expect members employed in the field to be free to discuss such policies. But I believe it's worth a critical look at the recent statements by all bank FD customers subject to TDS.
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