While
many customers complain of banks robbing them with higher charges,
those from the banking industry say customers need to pay for the
services they enjoy.
In the
past few weeks, we have seen banks either introduce new charges or hike
the existing ones sharply. Some of these charges are being re-introduced
after having been suspended during the demonetisation phase with a sizeable increase.
Take
Kotak Mahindra Bank for instance. Earlier, for a regular savings
account, it offered five free cash deposit transactions or Rs 7.5 lakh
per month—whichever was earlier. From 1 April, it will allow only four
free transactions and the amount has been reduced drastically to just Rs
2 lakh per month. Further, earlier all cash withdrawals at the home
branch were free, now after the four free transactions, customers will
have to pay a minimum Rs 150 per transaction. While many customers
complain of banks robbing them with higher charges, those from the
banking industry say customers need to pay for the services they enjoy.
Customers’ pain point, however, is not just the fee, but the
non-transparent, arbitrary manner in which charges are being levied.
Banks’
unique advantage of deducting money directly from bank account also
worries customers. “Unlike other service providers, banks have a higher
leverage over customers. They enjoy an unfair advantage and the RBI
needs to put in some controls,” says Ramganesh Iyer, Co-founder, Fisdom,
a wealth advisory firm. The RBI, though, is tied up with systemic
issues such as NPAs and has not taken a public stance on the matter.
“The RBI does not regulate service charges of banks. But, it has
instructed banks to keep charges within reasonable limits and be
transparent about them,” says an RBI spokesperson.
Let’s highlight some of the biggest pain points for banking customers before suggesting how they can be dealt with.
Minimum balance
Several big banks, such as the SBI, require customers to maintain a
minimum account balance or pay a penalty. To an extent, the anger
against maintaining a minimum balance in one’s account is a result of
misunderstanding the concept. The minimum balance implies average
minimum balance over a said period—usually a quarter or a month. “The
minimum average balance can be achieved by leaving one’s salary in the
bank for a few days,” says Neeraj Vyas, Deputy MD, SBI. For a person
earning a a monthly salary of Rs 30,000, a minimum monthly average
balance of Rs 1,000 can be maintained by leaving the salary in the bank
just for a day. This may not be a big issue for most people, but would
pinch those with a lower surplus.
Cash handling
The pre-demonetisation restrictions on cash transactions have been
brought back. Customers should bear in mind that the cash transaction
limits are the combined limits for deposits and withdrawals— at the
bank’s branch, ATM or third-party ATM. Customers will be allowed around
10 free transactions per month, including noncash transactions such as
checking the account balance at an ATM. “Most banks are allowing around
10 transactions per month, which is more than enough for most savings
bank customers. If someone wants more than this, let them pay per
transaction,” says Vyas.
Other Charges Customers also pay for SMS alerts, debit and credit card, online transactions— NEFT, RTGS,
IMPS—issuing extra cheque leaves, issuing a demand draft, besides
levying penalties in case of a bounced cheque or insufficient funds in
the case of an ECS mandate. In the wake of the banks justifying their
service charges, how can you make the most of the situation?
Bank charges that will pinch the most
Behavioural change
The minimum average balance requirement and restricted free cash
transactions require a change in the way you bank. “Banks are demanding a
new behaviour of leaving money with them. Increasing the use of debit
and credit cards is the smart way,” says Brijesh Parnami, ED and CEO,
Essel Finance Wealth Zone. Iyer concurs: “Customers should use this as
an opportunity to reduce their addiction to large number of cash
transactions.”
If
you still insist on dealing in cash, the only option left is to
withdraw more money at a time. So, if you used to withdraw Rs 5,000 each
8-10 times a month, now you will need to withdraw Rs 10,000 each 4-5
times. Though this goes against the ideal of creating a ‘less cash
economy’ being pursued by the government.
Charges that will rankle a little Downgrade your account
If you are not able to cope up with the minimum balance requirement,
you may opt for a Basic Saving Bank Deposit (BSBD). However, these
accounts come with restrictions. SBI, for instance, allows only four
free withdrawals in a month, including ATM withdrawals.
Use cash alternatives
If you believe in withdrawing only small amounts at a time, you can
take the help of mutual funds, which come with ATM facility. Not only
will investing in debt funds offer better returns than a savings bank
account, you wont have to pay any fee to withdraw money from them.
“After exhausting their free cash transaction limit, customers can use
mutual fund card facility such as that offered by Reliance for making
cash withdrawals,” says Amol Joshi, Founder, PlanRupee Investment
Services.
Don’t ignore bank intimations
Most banks send SMSs or emails before increasing their service charges.
Make sure your email and phone number is updated with the bank. Also,
do not ignore the messages from your bank. If you know what the bank is
doing, you won’t wake up to rude shocks. You also need to read your
monthly / quarterly bank statements carefully. In case your bank has
started charging for a service you do not need, you can opt out of it.
Improve banking relationship
Maintaining a comprehensive relationship with a bank can help you in
many ways. If you have multiple relationships—savings account, loan
account, credit card, investment account, etc.—with a bank, you can
approach your bank manager for a reduction in charges.
“We have seen instances where banks even waive penalties such as cheque bounce fee,” says Dipak Samanta, CEO, iServeFinancial.
These won’t burn a hole in your pocket
Approach ombudsman
If the bank has unfairly charged you and is refusing to reverse it, you
may approach the banking ombudsman. However, experts advise you to go
there only when large sums are involved. “Banking ombudsman in India is
not very customer friendly, so it is not advisable to approach it,
unless the disputed amount is large (at least Rs 1,000),” says Iyer.
Change your bank
If you are totally disenchanted with your bank the only option left is
to switch. But this should not be done in haste. “First open a new
account in another bank and make sure that all standing instructions
(for loans, utility bills, SIPs, etc.) are shifted to the new bank,”
says Amol Joshi, Founder, PlanRupee Investment Services. Within these
standing instructions, you need to prioritise loan EMIs, because your
credit score will get affected if there is a problem in executing the
ECS mandate. Another thing worth considering is the reward points
accumulated by you on your debt card from the previous bank. “Exhaust
the reward point on the card before you close down your account,” says
Joshi.
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