Should Bank charges be capped?
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.
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.
"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.
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