Recommendations to be submitted to the Reserve Bank of India for approval.
A committee of the Indian Banks Association (IBA) has finalised its recommendations on the fees that should be charged for basic services such as issuing a draft, remittances or for stop-payment instructions. It was asked to suggest reasonable fees for these and has been at it for some months.
These will now be sent to the Reserve Bank of India. “The committee members have agreed on caps on charges for different services and once these are approved by RBI, banks will not charge customers above the caps,” said a banker who was on the committee.
Faced with a rising number of customer complaints on excessive charges, RBI asked IBA to suggest guidelines. The bankers’ lobby asked its Committee for Customer Service, headed by Standard Chartered Bank CEO Neeraj Swaroop, for a report. A sub-committee headed by Union Bank of India Executive Director S Raman was tasked with framing the guidelines.
The panel was mandated to look into 27 items categorised as basic transaction services. Apart from charges for issuing cheque books and drafts, the committee also looked at charges for cheque return, reviving inoperative accounts, issue of duplicate pass books and other items such as not maintaining the prescribed minimum balance. Charges for special services such as loans and credit cards were not part of the purview.
Presently, there is wide disparity between what different banks charge customers. 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.
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The penalties for non-maintenance of minimum balance are also steep for private and foreign banks. ICICI Bank and Citibank charge Rs 750 per quarter; SBI, only Rs 75 per year for such non-maintenance.
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.