The Bank had decided to charge Rs10 for updating passbooks of account holders from other branches, but relented after a customer insisted that such basic services should not be charged
"Hum hain na." That's a sentiment that almost every bank will paraphrase and advertise to assure customers about its services. But how much does a customer have to pay for this service?
When a customer of a nationalised bank protested against new charges to be levied, the officials reversed the decision. Banks, however, insist that it is becoming increasingly difficult to continue providing basic services free of charges and customers will have to start paying up.
Canara Bank put up a notice at its Lokhandwala branch recently, announcing that from 15th February every customer would have to pay Rs10 for every entry in the passbook being updated. VS Venkataraman, one among the old customers, protested, saying the move was "absurd". He wrote, "It is the bounden duty of the banks to update the pass books of their customers. This is the minimum service expected from a bank free of charge and the depositor is entitled to know his balance."
While most private banks do not issue pass books, they send statements to customers periodically free of cost. So, the idea of a nationalised bank asking for money to provide this basic service would appear unjust. Mr Venkataraman said, "The nationalised banks should adopt the practice of sending regular statements to customers, if they are not prepared to update the pass book free of charge. Alternatively, they should update the pass book once a month free of charge."
Moneylife intervened on his behalf and spoke to members of Reserve Bank of India committee on depositors' issues. MN Gopinathan, member of the committee and shareholder director of Bank of India, replied and assured that Canara Bank had taken the necessary steps.
"I took up the matter with Jagdish Pai, the executive director of Canara Bank. I got a revert from him now that Canara Bank has decided not to levy charges for updating pass books. I should also clarify that Canara Bank was charging Rs10 only for updation of passbooks at a branch other than the one where the account was maintained. This too will not be levied," Mr Gopinathan said.
However, he explained that customers must understand that banks, like other commercial institutions, must make profits so they can serve other people as well. "Banking is a commercial activity and banks are expected to earn profits sufficient to satisfy capital adequacy requirements. While banking is an essential service, it is not quite reasonable to expect banks to render free service," Mr Gopinathan said.
He explained that banks earn less than 5% on a savings account of a customer which is a nominal amount. So if a customer has a savings account with a balance of Rs1,000 the bank will earn only Rs50. "This", he said, "just about covers the cost of one or two transactions. In fact more than 90% of the deposit accounts are not profitable at all. Already banks do a lot of cross subsidisation to maintain the accounts of a majority of the customers."
Therefore, he explained, that services like transfer of funds (amounting to more than Rs25,000) from one branch to another, must be subject to charges. He said that "in any case, no one, including the government, can afford to provide service free of any charge. At least the cost has to be recovered." Besides, he said, the charges levied by banks do not cover the costs.
While it is understandable that services must be paid for, the charges must be reasonable and justifiable. Give-and-take a little on both sides.
The demand for widening the ambit of the JPC is unlikely to be conceded as the rules of parliamentary procedure do not allow clubbing of various issues under an umbrella resolution
New Delhi: Indicating formation of a Joint Parliamentary Committee (JPC) to probe the second generation (2G) spectrum scam, the government today appeared to rule out widening its ambit to cover other scandals, reports PTI.
Parliamentary affairs minister PK Bansal gave such a hint at a press conference ahead of the three-month long budget session beginning Monday. A decision on setting up a JPC would be taken by Wednesday, he said.
After indications emerged that the United Progressive Alliance (UPA) government may agree to formation of the JPC to probe the 2G scam, an issue which had derailed the entire winter session of Parliament, the BJP has been talking of inclusion of the Commonwealth Games scandal and the Adarsh Housing scam also in its ambit.
Mr Bansal said that discussions with the opposition on the issue of JPC are "moving forward" and expressed the hope that the budget Session will "run smoothly".
"It is a premature question at the moment. We are still in the process of discussing with other political parties... A decision will be taken by Wednesday," Mr Bansal said when asked whether the government has decided to go in for a JPC.
The demand for widening the ambit of the JPC is unlikely to be conceded as the rules of parliamentary procedure do not allow clubbing of various issues under an umbrella resolution.
Mr Bansal sought to reject the demand for a combined JPC into the 2G scam, Commonwealth Games scandal and Adarsh Housing scam.
He said that according to rules of procedure of Parliament, a definite issue needed to be mentioned in the motion and there cannot be a probe on a general issue like corruption.
To a query on the possibility of prime minister being called by the JPC to appear before it, Mr Bansal said that in such an eventuality, the Lok Sabha speaker Meira Kumar will have to decide whether to allow it. "The decision of the speaker will be final."
Mr Bansal said that the Left parties could find a representation in the JPC as the four parties have given in writing to the government that they be treated as a group. The strength of the Left formation came down significantly in the current Lok Sabha from a record tally of nearly 60 in the last Lok Sabha.
Government sources said that the JPC could be a 30-member affair with 20 members from the Lok Sabha and 10 from the Rajya Sabha. If the committee is set up with 21 members, then 14 will be from the lower house and 7 from the upper house.
The JPC could have representation of seven to nine major parties. Congress, BJP, Trinamool Congress, Samajwadi Party, BSP, JD-U and DMK could get the membership in view of their numbers.
The AIADMK, which is in the forefront of the demand for JPC, is unlikely to be a member in view of lack of strength in Parliament and similar will be the fate of NCP, National Conference and Muslim League, despite being members of the ruling UPA.
Prime minister Manmohan Singh could make a brief statement in the Lok Sabha when a motion for JPC is taken up.
PV Narasimha Rao had made a statement when a JPC into the Harshad Mehta affair was set up in the early nineties.
Telecom minister Kapil Sibal is expected to move the motion following which there will be a debate, a demand being emphasised by the Congress.
The one-line motion could be on the lines of instituting a JPC probe to go into the alleged irregularities in the 2G spectrum allocation issue.
Mr Bansal's statements appeared significant in the backdrop of finance minister Pranab Mukherjee's remarks that no price is dear enough to ensure smooth functioning of Parliament and prime minister Manmohan Singh's assertion that he was not afraid of facing the JPC.
Leader of the opposition Sushma Swaraj has demanded the government that an announcement on the JPC would have to be made by Tuesday, 22nd February.
It is expensive and aimed at risk-averse investors, but would they know the risks inherent in buying gold as investment?
Reliance Gold Savings Fund opens up a new avenue for investing in gold. The Fund seeks to provide returns that closely correspond to returns provided by Reliance Gold Exchange Traded Fund (RGETF) which in turn invests in physical gold. It will essentially invest in Reliance Gold ETF but unlike buyers of gold ETFs, you don't need to have a demat account to buy it. It will provide returns of gold in paper form. The scheme's performance will be benchmarked against the price of physical gold.
What Reliance has essentially done is converted an ETF into a mutual fund product. This means Reliance can also offer it as a Systematic Investment Plan (SIP).
Reliance Gold Savings Fund is pitched as a good option for small investors who want to invest in gold. It has opened the doors for non-demat account holders as it provides the facility to invest through the online medium and through the physical application mode. Those who were not able to invest in gold ETFs since they did not have a demat account can now participate by investing in this Fund.
However, the issue is whether the product is truly beneficial for those whom it is meant for. The gold fund is aimed at those who do not even have a demat account.
Clearly, those who do not even have a demat account don't even know about the risks of equity or are risk-averse enough not to dabble in equity shares. Most investors like them have preferred a safe investment, such as fixed deposits.
When they invest in the Reliance gold mutual fund, would they be aware of the risks of investing in gold?
The price of gold has gone up six times in the last 10 years. Any asset that has gone up so much for so long a time carries a huge risk of a crash. How will a risk-averse investor react to an asset that can crash by 50-60% within a few months?
A second issue with the Fund is its cost structure. Entry load is nil and exit load is 2% if exited within one year; nil after one year. However, since this is a fund of fund (FOF) scheme, there might be ETF expense charges that one needs to pay. As per SEBI guidelines, a fund of fund can either charge 0.75% of total expenses or it can charge a maximum of 2.5% of total expenses including the weighted average total expenses of its underlying schemes, and not more than 0.75% as management fee from FOF investors. Though Reliance gold savings fund will charge 0.75% annually, it will cap the overall cost (FOF + ETF charges) at 1.5%.
Even then, a 1.5% cost is not insignificant.