The finance ministry stated that there has been no increase in service charges by Public Sector Banks (PSBs) in a statement dated November 3, 2020. This includes charges on regular savings accounts, current accounts, cash credit accounts & overdraft accounts.
“The service fee contributes to 30 per cent of the banking sector’s operating income. But the service fee component on cash deposits or withdrawals is relatively lesser. Hence, investors are not so bullish on PSU banks but continue to stay focused on private sector banks” explains Nitin Shakdher, Founder & CEO at the Green Capital Single Family Office.
Similarly, for Basic Savings Bank Deposit accounts (BSBD) including Jan Dhan accounts, the finance ministry said no service charge would be applicable on the 60.04 crore BSBD accounts. This account also includes 41.13 crore Jan Dhan accounts opened for free services by the poor and unbanked segments of the society.
This development comes after the Bank of Baroda made certain changes with regard to the number of free cash deposits and withdrawals per month with effect from November 1, 2020. However, the finance ministry issued a statement stating that the Bank of Baroda has withdrawn the charges in light of the current COVID-19 situation.
When it comes to the present scenario of banking charges, as per RBI guidelines, all banks, including PSBs, are permitted to levy charges for their services in a fair, transparent, and non-discriminatory manner, based upon costs involved. However, the finance ministry cited that other PSBs have intimated that they do not propose to raise bank charges in the near future in view of the COVID pandemic.
Each bank has a different set of rules and procedures, which varies across different products and customer segments. Premium account holders are charged a relatively lower transaction fee or are offered few services free of cost. Many banks don't charge for standing instructions or resetting the password or pin, but others do.
This again differs from bank to bank and the type of savings account and debit card customers hold. However, the majority of the customers are charged as per the card rates of the banks.
Banks levy penalties on savings accounts if you maintain a balance below the required threshold for the account. Adhil Shetty, CEO of BankBazaar.com explains: “The threshold amount is calculated on the basis of a Monthly Average Balance (MAB) or Average Quarterly Balance (AQB) depending on each bank’s criteria and the type of account. The charges could be a fixed amount, a percentage of the shortfall, or both depending on the bank’s norms.”
Many banks also allow up to five free transactions per month at their own ATMs, and three free transactions at other banks’ ATMs. If customers exceed these limits, they may end up paying around Rs 20 to Rs 50 per withdrawal. A basic debit card annual fee ranges between Rs 99 to Rs 750. On the loss of the debit card, customers may need to pay Rs 200 on average for a replacement card.
When it comes to requesting duplicate or additional statements, banks may charge customers between Rs 50 and Rs 100 per specified number of entries or around Rs 10 per page, depending on a bank’s norms.
For instance, money transfer through Immediate Payment Service (IMPS), National Electronic Fund Transfer (NEFT), and Real-Time Gross Settlement (RTGS) are charged depending on the amount slabs.
NEFT and RTGS transactions initiated through online modes are free. However, NEFT charges at branch range between Re 1 and Rs 25 (plus GST); RTGS at branch may cost between Rs 5 and Rs 50 (plus GST), and IMPS fee range between Re 1 and Rs 15.
“The government should try to harmonise and make charges uniform across products and services (much like a waiver of charges for NEFT/RTGS transactions). Customer awareness drives should be conducted by banks to inform customers about all charges and not just a written communication in microscopic font sizes,” says B.M. Gupta, Whole Time Director, Tourism Finance Corporation of India.
While experts say there is no action required on the finance ministry statement, there are few practices one can undertake. “If customers can’t do without cash, withdraw larger amounts at a time to avoid paying more. It is always to safer to have an updated statement of accounts with you. Email statements are not charged. So, it would be wise to have a regular e-copy of your statement for your reference,” says Shetty.