Customers may soon be spared penalties for non-maintenance of minimum balances in savings accounts with the Reserve Bank India asking banks to cut down services on low-balance accounts and do away with fines. Banks however say the new regime will lead to higher charges on services for customers.
In its first bi-monthly policy on Tuesday, RBI said that it proposes to frame comprehensive consumer protection regulations based on domestic experience and global best practices. “Banks should not take undue advantage of customer difficulty or inattention. Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level,” RBI said.
Many account holders who maintained dormant accounts, which were short of the Rs 10,000 insisted on by most private banks, found that their balances had vanished as the bank had deducted a penalty every quarter for not maintaining adequate balance.
Basic savings bank deposit accounts are those that have to be mandatory offered by banks without any minimum balance requirement. However, they can be used only for deposit and withdrawal of cash or receipt of money. There are no other services such as cheque books.
Banks however say that new norms will hit customers as the sum of all charges for individual services for they avail will be higher than the penalty. “The consumer will end up paying more. On the minimum balance of Rs 10,000 we earn only Rs 400 against which we provide ATM transactions, statement and cheque book. The break-even for providing these services is minimum balance of Rs 30,000. The alternative is that we have to charge for these services as against the Rs 400 we earn on minimum balance and the customer may end up paying more than the penalty if he regularly uses cheques and other services,” said Aditya Puri, MD, HDFC Bank. He added that this was not yet a directive and IBA has to get back to RBI with the viewpoint of banks that the customer may actually suffer,” said Puri.
“The direction is very clear. You create a set of accounts where you do not charge for not maintaining minimum balance but you will be entitled to only limited services. If you want more you will probably have to pay for it,” said KR Kamath, chairman, Punjab National Bank and also head of the Indian Banks Association. RBI also said that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. It has also asked banks to limit the liability of customers in electronic banking transactions in cases where banks are not able to prove customer negligence.