Bank charges may be capped: BS

Bank charges may be capped: BS
Banks may soon have to cap the charges on basic services such as issuing a draft, remittances or for stop-
payment instructions. Faced with a rising number of customer complaints on excessive charges, the
Reserve Bank of India (RBI) has asked the Indian Banks? Association (IBA) to come up with guidelines on
what the reasonable charges should be.
Accordingly, the industry lobby has asked its Committee for Customer Service headed by Standard
Chartered Bank CEO Neeraj Swaroop to submit a report to the regulator. In turn, a sub-committee of
bankers from State Bank of India, Corporation Bank, Citibank and ICICI Bank, which is headed by Union
Bank of India Executive Director S Raman, has been tasked with framing the guidelines.
Sources associated with the sub-committee told Business Standard that the panel has been mandated to
look into 27 items categorised as basic transaction services.
Apart from charges for issuing cheque books and drafts, the committee is looking at charges for cheque
return, reviving inoperative accounts, issue of duplicate pass books and others such as not maintaining the
prescribed minimum balance.
Charges for special services such as loans and credit cards are not within the committee?s purview.
?There is wide disparity between what different banks charge their customers. The committee will come up
with caps on what banks can charge for basic services,? said a member of the sub-committee.
For instance, public sector lenders such as State Bank of India (SBI) require regular savings account
customers to maintain a minimum average balance of Rs 1,000 per quarter, while private sector lenders
such as ICICI Bank and HDFC Bank require a minimum balance of Rs 10,000.
Foreign lenders such as Citibank, Standard Chartered and HSBC have minimum balance requirements of
Rs 25,000 per quarter.
The penalties for non-maintenance of minimum balance are also steep for private and foreign banks.
SBI charges Rs 75 per year for non-maintenance of minimum balance. ICICI Bank and Citibank charge Rs
750 per quarter.

SERVICE FEE
Service SBI ICICI Bank Citibank
Issuing demand draft 30 onwards 50 onwards 150 onwards
Cheque return (outward) 75.00 100.00 100.00
Cheque return (inward) 75.00 350.00 350.00
Setting up standing instructions 50.00 150.00 NA
Min balance penalty 100-200/ quarter 750/ quarter 250/ quarter
Stop payment 50.00 quarter 50.00 quarter 50.00 quarter
National electronic fund
transfer
5-25/
transaction
5-25/
transaction
5-25/
transaction
Amount in Rs, NA: Not available, *Issued through branches,
**Free if instructions given online Source: Bank websites
?A lot of these charges are deterrents and the banks don?t really make money from them. They are used to
increase efficiency and improve customer behaviour,? said another sub-committee member.
The committee is expected to submit its recommendations next month, and if RBI accepts them, the
guidelines will come into effect from 1 April 2010.
Banks are currently required to prominently display their service charges and fees in an RBI-prescribed
format on their website and at all branches.
Before 1997, service charges and fees were governed by IBA guidelines. Later, RBI decided to allow banks
to frame their own charges subject to approval from respective boards.
Similarly, RBI had asked IBA to come up with guidelines on the use of ATMs for inter-bank transactions.
Adherence to IBA guidelines on reasonable service charges and fees would be voluntary.