Bank charges are fine, but don’t dupe
Shaking off her lethargy on a lazy Saturday afternoon, a colleague turned to her bank statement to find out what the bank has been doing to her. It just spoiled her weekend.
To her shock, she found that the private bank had stolen about Rs 18,500 from her account over the years for not maintaining the minimum balance despite promising her that salary accounts did not require such a balance. She received SMS alerts for every debit and credit, but no such alert when the bank deducted funds for piercing the floor that was never revealed to her!
She is not alone. A recent disclosure showed State Bank of India earned Rs 1,771 crore between April and November last year as penalty from those who did not maintain minimum balance. If data from private sector is made public it would be nothing short of a scandal.
Millions of bank customers across the country are anguished at the sharp practices that banks indulge in. These vary from charges for falling below the minimum threshold on bank balance, to fee for transferring funds and numerous other services which customers don't even need.
To be sure, there are no free lunches. Every service requires that a fee be paid. Else, neither the service will be good enough to satisfy a customer, nor would it help the institution progress. When it comes to banks, the reasoning gets a bit tricky.
Banks' very existence is at the mercy of depositors who keep funds with them. If the entire edifice of a bank is built on depositors' funds how can a bank charge them for basic services and stipulate minimum balanceRs Banks say they are not keeping the money for free, but pay interest.
Banks also enslave individuals by getting into deals with employers for salary accounts leaving little scope to switch banks even if felt they cheated. Unlike weekend shopping, one can't choose the shop depending on the price tag.
The question is would banks incur losses if they don't charge such fees after earning on loansRs Probably not. Indian banks may be incurring huge losses on corporate loans but have one of the highest net interest margins in the world. It is in a way robbing Peter to pay Paul.
A conclusion is elusive because there's no data available publicly on the costs and benefits. Banks have every reason to keep it a secret because the more the opacity, the higher the profits in any business.
On a daily basis, there are at least 30 million transactions through various facilities such as NEFT, IMPS and RTGS. The value of digital payments in November 2017 was Rs 121 lakh crore. Back-ofthe-envelope calculations show banks earn about Rs 3,000 crore a month. That excludes interbank trades under RTGS.
For banks, fees and charges are the cash cow that would keep the register ringing even when billion dollar loans go kaput.
Profiting from a meaningful service is not bad after all. One need not spend hours in a queue in hot sun to pay electricity bill, or sleep overnight on a railway platform to reserve a ticket. Technology save precious time as well as transportation expenses. Convenience comes with a price. But at what priceRs Are they open or hiddenRs
The Reserve Bank of India had stepped in to stop many unscrupulous practices, but there's a long way to go. Businesses flourish when there's transparency and trust. Experience shows banks don't do much voluntarily. Over to the regulator.
Source: Economic Times