Over the past few days a storm of protest has erupted on social media over the ever-increasing charges levied by banks on depositors and borrowers. The most recent of these is the hefty cash handling charge that many banks plan to levy on customers who deposit or withdraw cash more than a specified number of times. The bankers think that this is fully justified.
In an interview to The Economic Times, Mr Aditya Puri, CEO and Managing Director of HDFC Bank, was quoted as saying that “customers need to pay for better service” to justify the charges levied by the bank. In a comparison that got people’s goat, he says, “You don’t go to Oberoi Hotel and ask for Mahesh Lunch Home rates”. This, in turn, triggered another storm of anger over the quality of HDFC Bank’s services to the average customer.
Almost on cue, Ms Arundhati Bhattacharya, chairman of State Bank of India, went to the media to justify a proposed re-introduction of a charge for failing to maintain average monthly balances, pegged at a high Rs5,000 for urban branches and Rs2,500 for rural ones. She tried to justify it saying the bank has 11 crore Jan Dhan accounts to ‘manage’.
One the one hand, the government wants everybody to have a bank account and salaries to be paid by cheque. How does it expect those in lower pay jobs, such as office assistants/peons, to maintain an average monthly balance of Rs5,000 in metropolitan cities, where costs are high? These charges are a double blow that will punish those who earn less. Depositors are beginning to chafe at the frequent levy of unexplained and unjustified bank charges, especially cash handling charges
, although the government has been clear way back in 2010, when cash handling charges were first proposed, that they need to be reasonable and not out of line with the average cost of providing these services.
Here are a few issues that have angered bank customers and led to a demand for bank account portability, which is important since it is no longer easy to shut down an account and move to another bank when electronic clearance service (ECS) mandates for payment of utility bills as well as credit cards, tax payments, demat accounts, mutual fund systematic investment plans (SIP) and equated monthly instalments (EMI) on loans are linked to an account. Banks know this and are taking advantage of the situation.
• Reset Charge on Mortgages:
A huge pain point is the manner in which borrowers, especially those with floating rate mortgages, are being charged hefty sums (which differ from one bank to another) to have their interest rates revised downwards. Firstly, while every upward revision happens automatically, customers are not told about the possibility of lowering interest rates, and that too is linked to a mandatory fee. Read ‘Beware Your Bank may be ripping you off’
• No protection on Digital Transactions:
While the government is pushing consumers into digital transactions, India has not adopted global best practices to protect consumers. All over the world, a consumer gets the benefit of the doubt when a bank account or website is hacked and her money is protected, unless the consumer’s own fault is established. Not so in India. Please read: On The Digital Highway Without A Seat Belt
. The RBI is still to issue a notification protecting consumers, despite the massive push towards digital transactions post demonetisation. Moneylife Foundation has sent a letter to the RBI governor urging him to issue the notification for limiting liability of customers in unauthorised electronic banking transactions and are waiting for suitable action http://foundation.moneylife.in/memorandums/
• Opt-in/opt-out controversy:
The issue of levying a charge unless a customer chooses to opt out of a service has been a matter for anger since the 1990s, when Citibank began to charge a small fee for providing an un-asked for insurance cover (Citibank Suraksha). The bank made millions of rupees through this trick, even through a controversy raged in the media for months. Cosnumers are discovering that HDFC Bank has been using the same trick to levy a fee of Rs 100 per quarter for a 'by-invite-only' feature that most customers do not need. http://www.moneylife.in/article/hdfc-bank-charges-rs100-per-quarter-for-accessing-by-invite-only-feature/49700.html
Whose Side is RBI On?
The RBI’s silence is the most worrying factor regarding these anti-consumer developments. A consumer charter was issued by the Reserve Bank on 3 December 2014, which would have protected some of our rights. However, it remains a meaningless notification because the bank has made no attempt to prescribe redress, penalties or compensation for treating consumers badly. The previous RBI Governor , Dr Raghuram Rajan, despite his star status, did nothing to implement the charter for nearly 22 months of his tenure. He also made some noises about asking each bank to set up its own ombudsman, which needlessly weakens the Consumer Charter concept, but did not implement that either. Please see Moneylife’s memorandum to the RBI governor, Dr Urjit Patel, seeking the implementation of the charter: http://foundation.moneylife.in/memorandums/
Most banks are flush with funds on account of demonetisation, but their self-created problem of colossal bad loans has hobbled their lending operations. It appears as if banks want to protect their profits by extracting higher charges and fees from consumers.
On Saturday, 18th March, several NGOs and activists will meet at Moneylife Foundation to discuss the situation and send a joint memorandum to the government and the RBI Governor. Those individuals or organisations who wish to contribute to the effort by pointing out to us specific issues, or join the discussion in person, may please write to [email protected]