“Banks in India might soon face caps on charges for basic services, such as drafts and remittances, as the Reserve Bank of India addresses rising customer complaints. The Indian Banks’ Association has been tasked with creating guidelines on reasonable charges for services. A sub-committee, including representatives from State Bank of India, Corporation Bank, Citibank, and ICICI Bank, will focus on 27 basic transaction services and is expected to submit recommendations to the regulator by next month. If accepted, the guidelines could come into effect from April 1, 2020.”
Banks may soon have to cap the charges on basic services such as issuing a draft, remittances or for stop-payment instructions. Faced with a rising number of customer complaints on excessive charges, the Reserve Bank of India (RBI) has asked the Indian Banks’ Association (IBA) to come up with guidelines on what the reasonable charges should be.
Accordingly, the industry lobby has asked its Committee for Customer Service headed by Standard Chartered Bank CEO Neeraj Swaroop to submit a report to the regulator. In turn, a sub-committee of bankers from State Bank of India, Corporation Bank, Citibank and ICICI Bank, which is headed by Union Bank of India Executive Director S Raman, has been tasked with framing the guidelines.
Sources associated with the sub-committee told Business Standard that the panel has been mandated to look into 27 items categorised as basic transaction services.
Apart from charges for issuing cheque books and drafts, the committee is looking at charges for cheque return, reviving inoperative accounts, issue of duplicate pass books and others such as not maintaining the prescribed minimum balance.
Charges for special services such as loans and credit cards are not within the committee’s purview.
“There is wide disparity between what different banks charge their customers. The committee will come up with caps on what banks can charge for basic services,” said a member of the sub-committee.
For instance, public sector lenders such as State Bank of India (SBI) require regular savings account customers to maintain a minimum average balance of Rs 1,000 per quarter, while private sector lenders such as ICICI Bank and HDFC Bank require a minimum balance of Rs 10,000.
Foreign lenders such as Citibank, Standard Chartered and HSBC have minimum balance requirements of Rs 25,000 per quarter.
The penalties for non-maintenance of minimum balance are also steep for private and foreign banks.
SBI charges Rs 75 per year for non-maintenance of minimum balance. ICICI Bank and Citibank charge Rs 750 per quarter.
| SERVICE FEE | |||
| Service | SBI | ICICI Bank | Citibank |
| Issuing demand draft | 30 onwards |
50 onwards |
150 onwards |
| Cheque return (outward) | 75.00 | 100.00 | 100.00 |
| Cheque return (inward) | 75.00 | 350.00 | 350.00 |
| Setting up standing instructions | 50.00 | 150.00 | NA |
| Min balance penalty | 100-200/ quarter |
750/ quarter |
250/ quarter |
| Stop payment | 50.00 quarter |
50.00 quarter |
50.00 quarter |
| National electronic fund transfer | 5-25/ transaction |
5-25/ transaction |
5-25/ transaction |
| Amount in Rs, NA: Not available, *Issued through branches, **Free if instructions given online Source: Bank websites |
|||
“A lot of these charges are deterrents and the banks don’t really make money from them. They are used to increase efficiency and improve customer behaviour,” said another sub-committee member.
The committee is expected to submit its recommendations next month, and if RBI accepts them, the guidelines will come into effect from 1 April 2010.
Banks are currently required to prominently display their service charges and fees in an RBI-prescribed format on their website and at all branches.
Before 1997, service charges and fees were governed by IBA guidelines. Later, RBI decided to allow banks to frame their own charges subject to approval from respective boards.
Similarly, RBI had asked IBA to come up with guidelines on the use of ATMs for inter-bank transactions.
Adherence to IBA guidelines on reasonable service charges and fees would be voluntary.
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Sir
Bank for their services are free to charge reasonable sum. In this electronic world the rationale of asking to maintain minimum balance in current or savings account is not just.It is also not just for bank like ICICI to charge service charge for cash deposit at its counter.
A bank is in business of cash transaction and funds transfer through various media.
RBI in business of monetary control and currency printing. Tomorrow,if RBI says since its printing currency it would charge every currency users charges for using it – will it be JUST.
THAT’s what exactly bank like ICICI are doing. Not only this they are actually under garb of CASH deposit and WITHDRAWAL – which is one of their primary responsibility towards customer – they are trading in currency by demoting it every time you deposit or with draw same. Can this be allowed and perpetuate?
Similarly – Bank clamors about minimum balance why? Are its customer suppose to maintain its minimum liquidity requirement. Does Bank ever pays a current account customer for the money he keeps in his account any interest. If it does not – why should their be a levy for non maintenance of minimum balance.
Funniest banking bank does it it provides Overdraft under various scheme to individual and allows it to be drawn from current/ savings account and here too borrower has to ensure minimum usage of sanction funds/limit and also ensure that minimum balance is maintained in the account. How on earth this jugglery of having an over draft account with minimum balance maintenance is possible – can some one ask ICICI and other banks who practice it.
Sorry for being harsh – but under freedom of fixing charges banker are taking Indians for a ride. We request RBI to seriously look into this. regards