What Can RBI Do?
The Reserve Bank of India should give a wake-up call to all banks to have them relook at the entire gamut of service charges – to bring in more transparency and standardization of chargeable items and also state them in simple language for customers to understand clearly what they have to pay for availing such services.
During our study, we found that what one bank described as ‘charges for not minimum balance’, another put it under ‘charges for not maintaining quarterly average balance’. Similarly, one bank’s ‘charge on addition/deletion of name’ becomes ‘charge for changing operational instructions’ for another (addition/deletion will involve changing operational instructions of the accountholder). This is what RBI says in its RBI Master Circular dated 1 July 2014, under ‘Levy of service charges – fixing service charges by banks’: The practice of Indian Banks' Association (IBA) fixing the benchmark service charges on behalf of member banks has been done away with and the decision to prescribe service charges has been left to individual banks. While fixing service charges for various types of services like charges for cheque collection, etc., banks should ensure that the charges are reasonable and are not out of line with the average cost of providing these services. Banks should also take care to ensure that customers with low volume of activities are not penalized. Banks should make arrangements for working out charges with prior approval of their Boards of Directors as recommended above and operationalize them in their branches as early as possible. On ‘Ensuring reasonableness of bank charges’: In order to ensure fair practices in banking services, Reserve Bank of India had constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges and to incorporate the same in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). Based on the recommendations of the Group, action is required to be taken by banks.
What Do Bank Customers Say? One thing is clear. In the view of the majority, banks are not transparent in their service-charge portfolio and may even be charging customers exorbitantly.