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Tuesday, April 1, 2014

Scrap fines for inadequate a/c balance, RBI tells banks

Mumbai: Customers may soon be spared penalties for non-maintenance of a minimum balance in savings accounts, with the Reserve Bank of India on Tuesday 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, the RBI said 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 a 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,” the RBI said. 

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Mumbai: The RBI has asked banks to do away with the practice of imposing fines on customers who do not maintain a minimum balance in their savings accounts or reduce services on such accounts. Many account holders who maintain dormant accounts which are short of the Rs 10,000 insisted on by most private banks have, at times, found their balances vanishing as the banks have deducted a penalty every quarter for not maintaining adequate balance. Basic savings bank accounts have to be mandatorily offered without any minimum balance requirement. They can be used only for cash deposit and withdrawal or money receipt. There are no other services like cheque books. 
    Banks, however, say the new norms will hit customers as the sum of all charges for in
dividual services they avail of 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, statements and cheque books. The break-even for providing these services is a 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 Indian Banks Association must get back to the RBI with the viewpoint of banks that the customer may actually suffer. 
    K R Kamath, Punjab National Bank chairman and IBA head, said, “The direction is very clear. You create a set of accounts where you do not charge for not maintaining a minimum balance, but you will be entitled to only limited services. If you want more, you will probably have to pay for it.” The RBI also said banks, in the interest of consumers, should consider allowing 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.

If you want more, you will probably have to pay for it 
K R Kamath 
| CMD, PUNJAB NATIONAL BANK

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