The Damodaran panel report on bank customer service says a simple deposit account is a right of every Indian citizen, being also crucial for economic well-being and financial stability.
The panel, established by the Reserve Bank of India, has recommended that banks give an option to open a plain savings account, without mandating a minimum balance. While banks currently offer no-frills deposit accounts that do not require a minimum balance, restrictions on these like non-availability of cheque books have prevented these from being widely used.
“Every bank should offer a basic account which permits a minimum number of transactions, without penalty for non-maintenance of a minimum balance. Such a penalty is seen by a number of customers as a very broad punishment imposed by a bank,” the committee said in its report. Customers should be given a choice of maintaining a minimum balance or pay transaction charges if the number of transactions exceeds the permissible level, it added.
It was observed that penal charges levied by banks were not in proportion to the shortfall in the minimum balance. The committee directed banks to inform customers immediately if the balance in their savings account breached the minimum requirement and the applicable charges for non-maintenance of the balance.
It also suggested that the guidelines for opening no-frills accounts need to be simplified to accelerate financial inclusion.
The lure of incremental fee income has prompted many banks in India to create a bundle of products and sell these as one package. The pricing of these products are often too high, especially for customers who need only basic banking services. “The process of suo motu offering of bouquet services without customer demand for the same and charging for the same, as well as creating higher threshold should be avoided,” the committee said.
According to the report, customers in general have expressed a desire to pay only for the product they use. They prefer basic, no-frills, products. The committee also recommended that the ceiling of insurance cover on bank deposits be raised to Rs 500,000 from the current Rs 100,000, to encourage individuals to keep all their deposits in one bank. “In fact, the committee felt that a way should be found out to insure 100 per cent of deposits,” it said.
