Revised charges of bank and its impact on you

After petrol, the price hike bug has bitten the banks too, with several of them raising their charges in the recent past. "Banks have increased the service charges as the RBI has imposed several conditions on services, such as the daily interest payment and five free ATM transactions. As a result, the interest outflow of banks has increased and added to the cash flow. This has to be recovered," says K Unnikrishnan, deputy chief executive, Indian Banks' Association.

Banks have also introduced fees for services which were available for free till now. For instance, ICICI Bank had allowed inter-bank mobile payments for free, but will now charge Rs 5 per transaction. Here are some services that will be more costly.

Revised minimum balance

A big change is that you will now need to maintain an average monthly balance (AMB) instead of an average quarterly balance (AQB). The amount, however, remains the same. So, if you had to maintain an average of Rs 20,000 in your account in a quarter earlier, you will now need to keep this amount every month. If the balance drops even for two days, you might be penalised.

The penalty for non-maintenance has inched up too. Kotak Mahindra Bank has increased the charges for non-maintenance of quarterly balance to Rs 750-1,000, depending on the percentage of balance, up from Rs 600 charged earlier. Some banks have shifted to a monthly system. From Rs 750 a quarter, the penalty for non-maintenance has increased to as high as Rs 350 a month. However, there's a benefit here. "This provides customers a chance to reduce the penalty they pay. So if you had paid Rs 750 for a fall in AQB in your account, you will now pay only Rs 250 for a month if the AMB drops. Thereafter, if you correct the situation for the next two months, you save about Rs 500," says Anindya Mitra, senior vice-president, retail liabilities, HDFC Bank.

Instead of quarterly, monthly is the new norm for most service charges. Earlier, you were allowed 12 branch transactions free in a quarter. However, now most banks have imposed a limit of four free transactions in a month, and all extra transactions will be charged. Even the fee for this has been hiked from Rs 50-60 to Rs 75-90.

Keeping an eye on your branch transactions is even more important if you're careless about the average balance in your account. For instance, HDFC Bank allows five cash transactions free in a month if you maintain the AMB, but if you fail to do so, you can only transact twice. Similarly, ICICI Bank earlier allowed three free cash transactions at branches and charged Rs 60 per transaction subsequently. Currently, the bank allows only two free cash transactions at a branch and levies Rs 90 per transaction after this.

Dormant accounts

You will have to pay for non-operational accounts too. HDFC Bank levies a fee of Rs 50 per quarter if your bank account has been unused for a year, while HSBC Bank charges Rs 150 per quarter if an account has been dormant for two years. Standard Chartered Bank charges Rs 1,000 a year for such accounts and the same amount per quarter for unclaimed funds. Also, make sure you update your contact details, especially the address, because if a letter sent to you is not received, you will have to pay Rs 50 per instance.

Credit card charges

If you have a credit card, leaving it idle may do you more harm than good. Standard Chartered Bank now levies a non-usage fee of Rs 250 if a credit card has not been used for a year. If the card has not been swiped within the first three months of it being issued, you will have to pay Rs 250. The bank has also upped its late payment fee in May this year from Rs 350-500 to Rs 500-600, depending on the outstanding amount. It has doubled the charge slip retrieval fee to Rs 200.

Banks have initiated a charge on credit card reward point redemption too. Currently, Axis Bank levies a fee of Rs 30 for each redemption request, while Standard Chartered Bank has increased the reward handling charges to Rs 99 from Rs 50.

Good news

There's relief on some fronts as banks have waived some dues. Intercity clearing charges have been removed and mobile banking services are free. At HDFC Bank and HSBC Bank, balance enquiry is free at all branches. In case of HDFC Bank, if your account balance is Rs 50,000 or more, transactions like NEFT, RTGS, cheque deposit and fund transfer are free. "A bank will be willing to forgo charges if a customer has a good relationship with it. Usually, the criterion is a high minimum balance," says Harsh Roongta, CEO, Apnapaisa.com.

Earlier, charges were deferred if you had a fixed deposit equivalent to the minimum balance. However, if you want to avail of this benefit now, you will need to open an FD of a higher amount. For instance, ICICI Bank waives fees for a Silver account, where the AMB is Rs 25,000 if you have an FD worth Rs 1.25 lakh or more.

 What you can do

If your bank has imposed a charge, tally it with the prescribed charges list, a copy of which is usually mailed by the bank to you at the end of the financial year. This is also displayed at the bank branch and on the website. Also, make sure that you were informed about the revised rates 30 days before you were asked to pay the new fee. Though you can't complain about the charges being unreasonable, if you are unconvinced about the bank revising its charges, you can close your account. The Banks' Code of Commitment states,"If we have made any change, we will notify the customer about this within 30 days. If this is to your disadvantage, you may, within 60 days and without notice, close your account or switch it without having to pay any extra charges or interest."

One way to avoid or reduce transaction costs is to use phone banking, Net banking and ATMs for services such as duplicate statements and stop payment of cheques, as these are usually free or can be availed of at a reduced cost through these mediums. It will also help to link your accounts and pay through ECS for bank-related activities, such as demat account annual maintenance charges (AMC). Axis Bank, in its schedule of charges, states, "The customers who have not opted for direct debit of charges from the Axis Bank account will have to pay Rs 2,500 instead of the regular AMC of Rs 500."

Source: Economic Times Courtesy : www.investmentkit.com/

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