Customers might not be required to pay for non-maintenance of a minimum
balance in a bank but could have to pay additional charges for use of
other services in such cases, such as an account statement or ATM withdrawals or cheque book issuance.
In its bi-monthly
monetary policy review on Tuesday, the Reserve
Bank of India
(RBI) said instead of penal charges for non-maintenance of a minimum
balance in ordinary savings bank accounts, banks should limit the
services available on such accounts, to those available to basic
accounts.
While the decision on
penalty removal is yet to be finalised, senior bankers said this would
mean an increase in the charges paid by customers for transactions of
all kinds. Further, RBI said banks should restore the services when the balances improve to the minimum required level.
Aditya Puri, managing director,
HDFC Bank, said: "The consumer will end up paying more in the
alternative. Let us say the minimum balance is Rs 10,000 and we earn
four per cent on it. For Rs 400, we give you cheque books for the full year, ATM transactions, we give you the account balance and the statements. Break-even for the bank to provide those services is Rs 30,000. If you have consumer interest
in mind, you will not push this because the alternative is, then you
are charged for these services. If I start charging you for these, you
will end up paying more. It is implied that if you don't charge on
non-maintenance of minimum balance, you are authorised to charge on the
transaction."
However, this proposal is still under consideration. Puri explained this was a suggestion by RBI and the Indian Banks' Association will explain its viewpoint to the regulator.
He noted a bank was also there to make a profit, not give free service. "This is a cost. To break even, to provide you the services, I actually need a minimum balance of Rs 20,000," he said.
K R Kamath, chairman and managing director, Punjab National Bank,
said for a basic account, the clear instructions are that you cannot
charge for not maintaining the balance. He said the direction is to have
an entire set of accounts where it is defined that they wont be charged
for non-maintenance of balance but would only be entitled to certain
services.
Soumya Kanti Ghosh, chief economic advisor — economic research
department, State Bank of India (SBI), said, “It will be a decision by
individual banks how they take the decision of non–maintenance of
minimum balance. Since the policy suggests that the banks should limit
the services to such accounts, so, if that is the case, there is a
possibility that there is a re-look at the charges for things such as
charges for number of ATM transactions etc. The RBI still needs to
clarify what it means by limit services.”
Rupa Rege Nitsure, chief economist, Bank of Baroda, said a penalty for
non-maintenance of a minimum balance was more relevant from the
viewpoint of private sector and foreign banks, which charge a huge
penalty or even make accounts defunct if a customer did not maintain a
minimum balance. “If we want more people to use banking facilities and
talk about financial inclusion, one cannot be so harsh on customers,”
she said.
According to the head of retail operations of a public sector bank,
these charges are levied to recover the operational costs incurred by
banks for maintaining the
accounts. "Even if there is just Rs 100 in such accounts, in our books
it is still an account and we have to maintain it. There is no benefit
except paying the minimum four per cent interest. Following
computerisation, the cost for maintaining such accounts has come down
but still it is an expense for banks. The penalty was intended to
gradually weed out such accounts,'' he said.
The central bank also said that in the interest of their consumers,
banks should consider allowing their borrowers the possibility of
pre-paying floating rate term loans without any penalty.
“If borrowers have taken a floating rate loan from banks and if they
pre-pay, banks are at a loss as it reduces the asset size. However, from
a recovery standpoint, pre-payment is a positive thing. Pre-payment is
not such a harsh action that the banks need to penalise the customers.
Penal action will reduce the loan appetite of borrowers for loans. Thus,
removal of penalty is an important step from the point of view of
financial inclusion,'' says Nitsure.
Banks offer floating rate loans to some segments like the MSME (micro
small and medium enterprises) sector. However, in case of retail loans,
only home loans have floating rate, in which case the pre-payment
penalty has already been abolished. All other retail loans like car
loans and personal loans are fixed rate loans.
The banking regulator said
that banks should also limit the liability of customers in electronic
banking transactions in cases where banks are not able to prove customer
negligence.
Source : http://www.business-standard.com/
