In a move aimed at increasing its share of current and savings account (CASA) deposits, IDBI has done away with the concept of minimum balance on these accounts and has waived off most service charges except those pertaining to bounced cheques.
RM Malla, CMD of the bank said the move is aimed at improving low-cost deposits (savings and current account) which stand at 14% — probably lowest in the industry. IDBI has a low share of retail deposits as a large part of its balance sheet originated from the erstwhile Industrial Development Bank of India, which relied largely on wholesale funds.
Until now, IDBI was charging depositors fees in the range of `100 to `200 if the quarterly average balance fell below `5,000. In case of current account, the fee was `10,000.
The services on which the bank has waived off interbank charges include cash withdrawal from ATMs above `10,000 a month. Most banks charge in the region of `10-20 for cash withdrawals above `10,000 if it is from another banks ATM.
Penalty on cheque bouncing is the only charge that has been retained. “It is an issue of governance and that is the only service for which the customer would be charged,” said Mr Malla.
Other services on which charges are waived off include demand draft (DD) issuances charges, DD cancellation charges, cash service charges (where customers are charged if they deposit a huge amount of cash in a branch), cheque book charges, stop payment charges, outstanding cheque collection charges, account statement charges, pay order charges, issuance of new card and standing instruction charges, among others.
IDBI will be the first bank to do away with minimum balance requirement and simultaneously waive off service charges. Most private and foreign banks are waiving off some service charges for saving and current customers, provided they maintain a minimum balance of `25,000 on a monthly or quarterly basis. On the other hand, there are banks which do not insist on minimum balance but charge customers on every service they provide.
Mr Malla said he is very hopeful that the bank’s CASA will touch around 20% by the end of this fiscal through this new approach. When asked if the bank’s fee income will be affected due to the waiver of charges he said: “Our assumption is that the benefits to the bank would be far more superior.” However, he declined to indicate the quantum of revenue loss due to the waiver.
When asked when the bank will review the new model he said: “I do not want to withdraw this offer in my tenure as CMD. If this new model fails to attract customers and increase CASA, I would assume that either our communication has failed or it is not backed by service.” Mr Malla has three years term at IDBI Bank.
IDBI Bank, which was earlier a financial institution and was merged with IDBI Bank in 2004, has around 35 lakh customers.