Banking
Are Bank charges going haywire? Has the regulator abdicated its role?
Over the past few days a storm of protest has erupted on social media over the ever-increasing charges levied by banks on depositors and borrowers. The most recent of these is the hefty cash handling charge that many banks plan to levy on customers who deposit or withdraw cash more than a specified number of times. The bankers think that this is fully justified.
 
In an interview to The Economic Times, Mr Aditya Puri, CEO and Managing Director of HDFC Bank, was quoted as saying that “customers need to pay for better service” to justify the charges levied by the bank. In a comparison that got people’s goat, he says, “You don’t go to Oberoi Hotel and ask for Mahesh Lunch Home rates”. This, in turn, triggered another storm of anger over the quality of HDFC Bank’s services to the average customer. 
 
Almost on cue, Ms Arundhati Bhattacharya, chairman of State Bank of India, went to the media to justify a proposed re-introduction of a charge for failing to maintain average monthly balances, pegged at a high Rs5,000 for urban branches and Rs2,500 for rural ones. She tried to justify it saying the bank has 11 crore Jan Dhan accounts to ‘manage’. 
 
One the one hand, the government wants everybody to have a bank account and salaries to be paid by cheque. How does it expect those in lower pay jobs, such as office assistants/peons, to maintain an average monthly balance of Rs5,000 in metropolitan cities, where costs are high? These charges are a double blow that will punish those who earn less. Depositors are beginning to chafe at the frequent levy of unexplained and unjustified bank charges, especially cash handling charges, although the government has been clear way back in 2010, when cash handling charges were first proposed, that they need to be reasonable and not out of line with the average cost of providing these services. 
 
Here are a few issues that have angered bank customers and led to a demand for bank account portability, which is important since it is no longer easy to shut down an account and move to another bank when electronic clearance service (ECS) mandates for payment of utility bills as well as credit cards, tax payments, demat accounts, mutual fund systematic investment plans (SIP) and equated monthly instalments (EMI) on loans are linked to an account. Banks know this and are taking advantage of the situation. 
 
Reset Charge on Mortgages: A huge pain point is the manner in which borrowers, especially those with floating rate mortgages, are being charged hefty sums (which differ from one bank to another) to have their interest rates revised downwards. Firstly, while every upward revision happens automatically, customers are not told about the possibility of lowering interest rates, and that too is linked to a mandatory fee. Read ‘Beware Your Bank may be ripping you off’
 
No protection on Digital Transactions: While the government is pushing consumers into digital transactions, India has not adopted global best practices to protect consumers. All over the world, a consumer gets the benefit of the doubt when a bank account or website is hacked and her money is protected, unless the consumer’s own fault is established. Not so in India. Please read: On The Digital Highway Without A Seat Belt. The RBI is still to issue a notification protecting consumers, despite the massive push towards digital transactions post demonetisation. Moneylife Foundation has sent a letter to the RBI governor urging him to issue the notification for limiting liability of customers in unauthorised electronic banking transactions and are waiting for suitable action http://foundation.moneylife.in/memorandums/
 
Opt-in/opt-out controversy:  The issue of levying a charge unless a customer chooses to opt out of a service has been a matter for anger since the 1990s, when Citibank began to charge a small fee for providing an un-asked for insurance cover (Citibank Suraksha). The bank made millions of rupees through this trick, even through a controversy raged in the media for months. Cosnumers are discovering that HDFC Bank has been using the same trick to levy a fee of Rs 100 per quarter for a 'by-invite-only' feature that most customers do not need. http://www.moneylife.in/article/hdfc-bank-charges-rs100-per-quarter-for-accessing-by-invite-only-feature/49700.html
 
Whose Side is RBI On?
The RBI’s silence is the most worrying factor regarding these anti-consumer developments. A consumer charter was issued by the Reserve Bank on 3 December 2014, which would have protected some of our rights. However, it remains a meaningless notification because the bank has made no attempt to prescribe redress, penalties or compensation for treating consumers badly. The previous RBI Governor , Dr Raghuram Rajan, despite his star status, did nothing to implement the charter for nearly 22 months of his tenure. He also made some noises about asking each bank to set up its own ombudsman, which needlessly weakens the Consumer Charter concept, but did not implement that either. Please see Moneylife’s memorandum to the RBI governor, Dr Urjit Patel, seeking the implementation of the charter: http://foundation.moneylife.in/memorandums/
 
Most banks are flush with funds on account of demonetisation, but their self-created problem of colossal bad loans has hobbled their lending operations. It appears as if banks want to protect their profits by extracting higher charges and fees from consumers. 
 
On Saturday, 18th March, several NGOs and activists will meet at Moneylife Foundation to discuss the situation and send a joint memorandum to the government and the RBI Governor. Those individuals or organisations who wish to contribute to the effort by pointing out to us specific issues, or join the discussion in person, may please write to [email protected]
 

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COMMENTS

Rajan Vaswani

8 months ago

What an irony! (Demon)-itisation was supposedly to suck out black money. Some of the black money got into Jan Dhan accounts, and now the honest bank account holders are supposedly being compelled to keep Rs.5000 minimum balance to support banks to keep those Jan Dhan accounts hosting the ill-gotten gains, which have 0 minimum balance condition.

jaideep shirali

8 months ago

Mr Aditya Puri seems to have forgotten that HDFC Bank exists because of his customers, not the other way around. HDFC Bank's level of ethics must be far lower than a roadside vendor, because they mis-sell products merrily, ULIPs was one classic case and even today, I doubt HDFC can really be called as being on the customer's side at all times. In terms of service, Mr Puri's bank may be lower than the so called Mahesh Lunch Home, but the charges are at the Oberoi level. Wake up Mr Puri, your customers may decide they do not need your bank's arrogance, there are other options for them.

Vaibhav Dhoka

8 months ago

All Indian regulators in India are semi DEAF & DUMB.They hear only things they are interested. They act only for few privileged persons,let it be RBI or SEBI or IRDA or any other regulator .The saying goes "Robbing Peter to pay Paul"suits our regulators.What punishment RBI has served on erring bankers like Axis Bank,Bank of Maharashtra to name few who helped exchange of notes thus causing hardship to common man and senior citizens.Until accountability is established on failure of regulators one day public uproar will be there and it will be difficult to hold them then.Our regulators enjoy Fat pay but no accountability.

Govinda Warrier

8 months ago

In the long term portability of accounts among same or similar types of banks may be of some advantage to customers. The banks, especially the big ones both in public sector and private sector have different approaches to Government and big account holders a "yours obediently" and "May I help you?" approach and when it comes to smaller accounts (including JanDhan, Pension, several accounts opened for crediting 'benefits' an approach of "take it or leave it... come when we're free... We're doing a favour to you, because Government wants us to do...".
If cost benefit analysis is the guiding factor, Government should compensate Banks for losses and "tax" Banks' income in other areas to fund the outgo. If regulating Interest rates and service charges is the only language Banks will understand, RBI should not hesitate to go back to the pre deregulation days.

S SRINIVASA RAJAN

8 months ago

It is deplorable that bankers are finding newer means to fleece their customers and RBI under Dr. Urjit Patel is turning a blind eye to these charges. While Government and especially PM are trying their best to move from a predominantly cash based economy to cashless economy bankers have found this a great opportunity to loot the general public. As correctly observed it is not easy to close the bank accounts since they are linked to various other activities like ECS linked SIP, utility bill payments, receipt of dividends etc. Our Members of Parliament continuously keep talking of common man and I wonder why PAC is not raising these issues with RBI and minisry.

MOHAN SIROYA

8 months ago

Protection for any digitize transaction is completelhy absent. We read many stories of how use of Debit/ATM cards are risky. In my area there are a number of ATMs whihc are just installed in shops and anyone drwaing money thru' ATM is at grave risk. There is no gaurd,no enclosure and even no CCTV camera.When this is pointed out to RBI and action demanded as per theri own rules of custoemr data safety or ATM, operations. RBI keeps silent. When asked under RTI what has been done or envisged to be done as a regulator by RBI, it discards info. saying "This does not fall under the definition of "Information". So the ATM card users will always remain vulnerable to frauds adn leakages.

SuchindranathAiyerS

8 months ago

As the saying goes, "If you have a gun, you can rob a bank, but if you own a bank, you can rob anyone".

Arundhati Bhatacharya, Urjit Patel, Arun Jaitley and the Chairmen and Boards of Indian Public Sector Banks seem to have learned banditry without going to Harvard. By dint of sheer aardvark.

Anuj Kapila

8 months ago

I made the shift to my local Post Office Bank last year. It meets all my basic needs such as debit card, Mutual Funds, FD/RD etc and staff is very courteous with no pushing of products in your face. Guess its time to revert to the good ol days of doing business over a cup of tea with the Manager.

REPLY

Arunkumar A Vijayan

In Reply to Anuj Kapila 8 months ago

It is also said that you get a postal ATM card in 15 days after opening a postal savings account. The ATM card can be used in any bank ATM or postal ATM and there is no charges for any number of transactions done by the ATM card. I too think its high time that we all shift to Postal banking.

Arunkumar A Vijayan

In Reply to Arunkumar A Vijayan 8 months ago

http://www.thehindu.com/news/cities/chennai/use-bank-debit-cards-to-withdraw-cash-from-postal-atms/article17419569.ece

https://www.indiapost.gov.in/Financial/Pages/Content/Savings-Account.aspx

please see the above two links. The minimum balance required is also very small and cheque facility can also be availed.

MOHAN SIROYA

8 months ago

Your points are all correct and applicable. I am not Anti "Modi or BJP" who have so far displayed a BAD Governance. If now I sound anti Modi, let that be but none can suppress my right to expression .
In the guise of "Acche Din" Modiji is bringing the "Bure Din" for Indians at large.
Forget the owes after NOTEBANDI. In every sphere we are suffering and the most affected class is of aged and poor citizens. The aim to effect demonetization was to punish the Black money hoarders and bring back the huge booty to economy, eliminate the Corruption from the sysytem and break the chain of Terrorism thriving on black or duplicate currency. Oppsition and intellectuals cried hourse to know from the Prime MInister or RBI to give us figures as to how much BLACK MONEY the nation has recoverd and from whom ? No answer. Just a week back a report of Transparency International compiled in Jan 2017 revealed that India tops on the corruption Index amongst Asian Nations. And the terrorism is unaffected . Thus having failed to achieve aim of demonetization , the Government and the machinery manning Indian economy has adopted such measures which are putting the lives of common man in more stress. By writing of a huge NPA of 9000 crore plus of BAD debts of the big, mediem or small Industrialists, the Government failed to improve the financial health of the Banks. In last 6 months almost another NPA to the tune of Rs. 5000 crores is again created in banks becasue of the Government's open policy to encourage any tom and dick to take loan from the bank for starting any enterprise in order to create some emplyment avenues for the youths. That proved a day dream. Now the unemplyment index is much more than what it was till June 2016.
The Sixth Pay Commission have made the huge working class poulation of Government and Semi Govenment Organizations flush with funds . They have now become more bold to accept any bribe opnely in New Currency as they are now economiclly empowered to defend any charge of corruption in the courts. Now further the Government is envisaging to enhance their DA because the CPI has increased due to all round price spirall. The petroleum products , household consumption items, school education have become costlier, services had also been affected due to service tax rise to all time highof 15 percent now. The milk prices , drug prices, Travel cost ( including AC trains, Air and fuel cost)have all been hiked,Courier service which used to cost Rs. 20 for local is now costing Rs. 35 /- Bank emplyees ,in spite of inudlging in malpractices during Note Bandi trial period have siffoned out millions of new currency to hoardrs which was recovered by I T or Enforcement agency raids but instead of punishing such greedy criminals, the system is rewarding them . Hence, to continue to retain banks in good economic health the RBI had no remedy but to abdicate its regulating accountability to deny the banks to raise Bank charges arbitrarily and recover from the common man. Modi Government first foreced the common man to be digital and cashless thru' bank and now they are forced to pay thru' their noses for availing these services . These are "Acche Din" why we should grumble ?
As far the Gold seniors or Octagenrians, they do not exist in the eyes of this Government. Millions of such aged persons who are not lucky pensioners were barely surviving at 8% interest with Bank FDs on their life long savings . Since the FD rates have been reducing to a level which cause penury in interst income from a manageable sum to a pathetic peanut income, the Government wants them to block the money in 10 or 15 year bonds ,if they want 8 percent returns. Now can Modi Ji guarantee if an ailing gold senior will survivie even for one more year , due to sky rocketing cost of health care and reduced income? Why grumble ,just suffer is the Mantra to day for the 'moony promise' of better tomorrow.

V ganesan

8 months ago

main job of bank is lending and borrowing in a organised manner and in a regulated manner.LET them allow all account holders to have zero balance axccount .And they make profit by way of spread in interest. all banks in india not withdrawing these charges i am planning a big darna infront of RBI IN CHENNAI.wHY THESE PEOPLE ARE LOOTING MONEY FROM COMMON MAN AND PAYING IT TO BIG CORPORATES IN THE NAME OF BIG NPA.APART FROM THAT THEY ARE MISSELLING MUTUALFUNDS AND INSURANCE.If this trend continues people in INDIA WILL NOT TOLERATE ANY MORE.Banks are only to serve people. Not to loot money from the public.Otherwise ban all banks in india and allow only cash transaction or allow barter system

V ganesan

8 months ago

main job of bank is lending and borrowing in a organised manner and in a regulated manner.LET them allow all account holders to have zero balance axccount .And they make profit by way of spread in interest. all banks in india not withdrawing these charges i am planning a big darna infront of RBI IN CHENNAI.wHY THESE PEOPLE ARE LOOTING MONEY FROM COMMON MAN AND PAYING IT TO BIG CORPORATES IN THE NAME OF BIG NPA.APART FROM THAT THEY ARE MISSELLING MUTUALFUNDS AND INSURANCE.If this trend continues people in INDIA WILL NOT TOLERATE ANY MORE.Banks are only to serve people. Not to loot money from the public.Otherwise ban all banks in india and allow only cash transaction or allow barter system

RBI to issue new Rs 10 notes, old ones to remain valid
The Reserve Bank of India (RBI) on Thursday said it will shortly issue new Rs 10 denomination currency notes, while clarifying that the old Rs 10 notes will also remain valid.
 
"The Reserve Bank of India will shortly issue Rs 10 denomination banknotes in the Mahatma Gandhi Series-2005 with inset letter 'L' in both the number panels, bearing the signature of Urjit R. Patel, Governor, Reserve Bank of India, and the year of printing '2017' printed on the reverse of the banknote," a release issued by the apex bank said.
 
"All the banknotes in the denomination of Rs 10 issued by the bank (RBI) in the past will continue to be legal tender," it clarified.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Vjay Kumar

7 months ago


very niche article love to read it
Go Processing Complaints

Minimum balance penalty to offset costs of Jan Dhan accounts: SBI
Providing a rationale for re-introducing penalty for non-maintenance of minimum balance in its savings accounts from April 1, State Bank of India chief Arundhati Bhattacharya on Wednesday said the public sector lender needs funds to balance the oeprational costs of Jan Dhan accounts.
 
"Now there is a burden of a lot of things. We have 11 crore financial inclusion accounts - basic savings and Jan Dhan accounts - and have to manage them as well," Bhattacharya said on the sidelines of a women entrepreneurs' national convention here.
 
"SBI was the only bank that didn't have this as we have removed it in 2012," she said.
 
This condition of maintaining minimum balance will not be applicable to the Jan Dhan accounts, she added.
 
According to reports, the government has asked SBI to reconsider its decision to levy the penalty, though Bhattacharya said that the bank has not received any formal request on this.
 
She also said that SBI's requirement for minimum balance is lowest among all banks. 
 
The SBI has made it mandatory for savings accounts in metropolitan areas to maintain a minimum balance of Rs 5,000, Rs 3,000 in urban areas, Rs 2,000 in semi-urban areas and Rs 1,000 in rural areas, from April 1.
 
These charges will be based on the difference between the minimum balance required and the shortfall. For metropolitan areas, if the shortfall is greater than 75 per cent. the charges would be Rs 100 plus service tax.
 
If the shortfall is between 50-75 per cent, the bank would charge Rs 75 plus service tax and for below 50 per cent shortfall, a fee of Rs 50 plus service tax would be levied, according to the SBI notification of new charges.
 
Similarly, for rural areas, the penalty for non-maintenance of minimum balance ranges from Rs 20-50 plus service tax.
 
A number of private sector banks already have the condition for maintenance of minimum balance.
 
ICICI Bank savings accounts need to have a minimum balance of Rs 10,000 in urban and metropolitan areas and Rs 5,000 in semi-urban areas.
 
In an HDFC savings account, the user needs to have a minimum balance of Rs 10,000 in urban and metropolitan areas, Rs 5,000 in semi-urban areas and Rs 2,500 in rural areas.
 
Axis Bank also has the condition of maintaining a minimum balance of Rs 10,000 in its savings accounts.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Simple Indian

8 months ago

Why should regular Savings Bank A/c holders bear the cost of SBI/Banks maintaining Jan Dhan Yojna A/cs, which they have nothing to do with ? Besides JDY is a Govt initiative and Govt should bear the expenses for maintaining such A/cs, and compensate Banks accordingly. Hence, instead of asking regular S.B. A/c holders to maintain a higher MAB, Banks should stop paying hefty dividends to the Govt and use that money to maintain JDY A/cs.

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