Non-operative bank accounts exempted from minimum balance penalty

RBI,  as part of a consumer protection initiative, has asked banks not to levy penalties on customers who don't maintain a minimum balance in any inoperative account

The Reserve Bank of India (RBI) on Wednesday directed all banks not to levy penal charges for non-maintenance of minimum balances in any inoperative account.


Earlier, in its first bi-monthly monetary policy, the central bank has proposed certain measures towards consumer protection such as non-levy of penal charges for non-maintenance of minimum balance in any inoperative accounts.


Several banks, including the State Bank of India (SBI), do not levy any charge if the minimum balance is not maintained in an inoperative savings account.


In the first bi-monthly monetary policy statement for 2014-15, the RBI had asked banks not to levy penal charges on customers who do not maintain minimum balance in basic savings bank accounts. RBI governor Dr Raghuram Rajan, however, had said that banks, instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level.


For operative accounts, customers of ICICI Bank and HDFC Bank are charged Rs750 per quarter if they don't maintain a minimum average quarterly balance of Rs10,000 in urban centres and Rs5,000 in semi-urban areas.


Greater Responsibilities, Higher Penalties

Professionals like CAs and CSs can be punished with a fine of Rs 1 lakh-Rs 5 lakh which can...

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Stop gossiping about RBI Governor's future post 16th May verdict

All RBI Governors who have stayed in office beyond four years have contributed significantly to the banking system. So there is no need for mainstream media to gossip about the future of Governor Rajan post 16th May verdict

Mainstream media, during the last few weeks, starving for controversies, has been generous in dishing out gossips about the continuance of Dr Raghuram Rajan as governor of Reserve Bank of India (RBI), if the dramatis personnae in New Delhi change post-16 May 2014. This writer is not interested in joining issues with those who argue the case on either side mixing politics and economics(or banking?). Still, as one who had defended in the media, the case for an extension of term by one year for Dr Rajan’s predecessor during the first half of 2013, some observations on the subject from this writer may be in order.


As part of his remarks at the Brookings Institution, on 10 April 2014 Dr Rajan made the following observations qualifying them as his personal views:


Central bankers are usually reluctant to air their concerns in public. But because the needed change has political elements to it, I take my cue from speeches by two central bankers whom I respect greatly, Ben Bernanke in his 2005 'Global Savings Glut' speech, and Jaime Caruana in his 2012 speech at Jackson Hole, both of whom have raised similar concerns to mine, although from different perspectives. Before starting, I should disclose my interests in this era of transparency. For the last few months India has experienced large inflows of capital, not outflows, and is seen by the markets as an emerging economy that has made some of the necessary policy adjustments. We are well buffered with substantial reserves, though no country can be de-coupled from the international system. My remarks are motivated by the desire for a more stable international system, a system that works equally for rich and poor, large and small, and not the specifics of our situation.”


This article is not about the content of Dr Rajan’s 10th April speech, which has focus on monetary policy from an international perspective, but to re-emphasise that the present RBI Governor has taken his present job seriously and any talk about destabilising his position post-16th May can do harm to Indian economy, but may not have much impact on his pursuit of the objectives he cherish.

Those who are still in doubt are invited to read his book 'Fault Lines', which had won the FT-Goldman Sachs Business Book of the Year Award 2010. In the introduction to the book, Dr Rajan explains the use of the metaphor of fault lines thus:


In geology, fault lines are breaks in the Earth’s surface where tectonic plates come in contact or collide. Enormous stresses build up around these fault lines. I describe the fault lines that have emerged in the global economy and explain how these fault lines affect the financial sector.”


Quoted this, to flag the clarity maintained throughout the book, in explaining the multi-dimensional economic riddles bothering governments, planners, economists and other stakeholders at this crucial stage of economic development and suggesting possible solutions.


About the content of the book, I am not making any comment, but would go with Indian Express which said: “Brilliant. No other word for it…Buy it. Read it. Read it again.”


Dr Rajan concluded his postscript of 'Fault Lines' with the following observation: “We have uncovered deficiencies, and we know that the system has little capacity to sustain a repeat. We will bicker, no doubt, and we will try easy options. But eventually, as we realize that there is no alternative to addressing our real problems, democratic debate, coupled with human ingenuity, will come up with widely acceptable solutions to our problems. We may not see those solutions now, but so long as we are aware of the problems we have to solve, and work on them, I have no doubt that solutions will emerge.”


The optimism about India expressed in the chapter “Afterword: What Lies Ahead for India” explains why Dr Rajan is in India today. Destiny has now positioned Dr Rajan in a slot from which he will be able to contribute towards realising his vision. Let us wish, Reserve Bank led by Dr Rajan will guide Indian financial sector to play the proactive role in the country’s growth story, making this decade special for all Indians.


It has to be said to the credit of Government of India (GOI) that, even if it was in self-interest, generally, compared to other statutory bodies and public sector units (PSUs) the RBI has been getting a fair deal in selection and timely appointment of its head and his deputies. The appointment process in July-August 2013 was more transparent and at that time, all had accepted that among the candidates considered, the most meritorious had been selected.


This should have given considerable confidence to Dr Raghuram Rajan while taking over charge from Dr D Subbarao in the first week of September 2013.


I had observed in an article written on the subject during August 2013 (The Global ANALYST, September 2013) as under:


“The only negative in the whole affair is, as on several occasions in the past, once again GOI has opted for a short-term appointment. This time it should have been for a five-year term in the first instance itself. We are not privy to the information as to whether the decision to appoint Rajan for three years was because of a casual ‘cut & paste’ from previous appointment orders or because GOI thought, if friction between RBI and GOI persists, changing RBI Governor more often is a soft option. As someone in the media already observed, the flip side is, if things do not go well, Dr Rajan could choose an assignment anywhere, a choice, many in top positions in India do not have.

Ideally, RBI Governor should have an average tenure of five to 10 years. If such a norm was followed, Dr Rajan would have been perhaps the 15th Governor of RBI. Now he is 23rd! All Governors who have stayed in office beyond 4 years have contributed to the strength of the central bank.”


(MG Warrier is former general manager of Reserve Bank of India.)



Nagesh Kini

2 years ago

Thanks for your 'thank you' Mr. Warrier.
Deepak Parekh in a full page interview on RBI Guv appointed has said - "The government, whoever,if he changes the governor, he will get such a bad name. There is a possibility of a downgrade if you change the governor.. you are politicising the position."

It must be remembered that it was and earlier astute RBI governor who saved from grave forex crisis.

MG Warrier

2 years ago

TVG, Kini and Banu
Thanks for the comments. I was in two minds about writing this. Frankly, I didn’t want to give an opportunity to those who enjoy discussing non-issues. Still, the way in which certain vested interests are working overtime to divert attention of even Dr Rajan who meticulously focuses on issues on hand changed my mind. Even today(May 8), a financial newspaper carried a story supporting the demand for manifold rise in oil prices sprinkling in it this issue, perhaps to prove credibility.


yasmin banu

In Reply to MG Warrier 2 years ago

A person of knowledge and analytical capability should always impart to the society. We are a nation unfortunately follow the herd and need a good shepherd. You have the potential.

As articulated in your write-up the governors did a commendable job including Dr. Subba Rao.

The post of RBI Governor is a regulatory one and when some as competent as RGR is handling it, at least allow him to complete the term.

Finally, people should understand that he is not in other's mercies, there are many greener pastuer's for him. Only he has to make the calls.

thank you sir, please continue writing informative information, we are always there for you.

Nagesh Kini

2 years ago

Yashwant Sinha, a BJP leader and a former FM told Business Line - "I don't think we should subject the post of RBI Governor to politics.There is no need to change the Governor with the formation of a new government. Criticism by some BJP leaders for raising policy rate thrice to curb inflation should not be interpreted as seeking removal. "It is the responsibility of the government to curb inflation and thereby create space for RBI to bring rates down. It cannot be done in a vacuum. I'm not faulting Rajan for the monetary policy he has adopted in the given situation."
The only two instances of removal of governors were by VP Singh in 1977 and Chandrashekar in 1990 when Sinha was the FM and he revealed that the removal was 'purely political'.

Gopalakrishnan T V

2 years ago

The continuance of RBI Governor after May 16th should not have been the subject of gossipping by any one in the media as once some one is appointed based on merits and as per the Constitution,the matter ends. Both the Central government and RBI have common objectives irrespetive of the political partty in power,to achieve economic growth with price stability. Who occupies RBI's chair is immaterial provided, the person occupying is incompetent,inexperienced and indifferent to deliver the goods. As far as Mr Rajan is concerned, he has been brought back to India as an Economic Advisor based on his acdemic and professional merits par excellence and then has been appointed as Governor,expecting him to improve the economy and take it forward to bring it on par with some advanced economic powers of the world. Politics should not play mischief and media should not give ideas to play politics with such vital appointments which are essential to the economy' growth without interference of politics. Mr Rajan has proved his mettle during his last few months of performance particularly in bringing some order in the forex market and stability in the external value of ruppee and he has his own plans to bring back the growth keeping the inflation under control.Hope,the new Government will surely appreciate his idelogies and give him the full cooperation to take the economy forward. Hope Politics will not play spoilsport and take away the much needed condfidence in the Governance Standards by taking vengeance on the Previous Government's appointments and things like that.

yasmin banu

2 years ago

After reading umpteen articles about the fate of incumbent RBI Governor Dr. RGR this is, the first write up that inoculated some sense to the readers. It is my limitation of understanding of how the press faculty functions, roughly nine months before the same press faulty heralded his arrival as a Messiah for India doomed economy now the same media finds time in analyzing his ouster.

Taking up his governance since his took charge Mint Street slowly and steadily with his team made changes including the stabilizing of the INR after a free fall during August 2013. Along with the finance ministry reduce the Current Account deficiency, increased the RBI currency reserves and introduced SWAP facility for FCNR to list a few of his achievements.

In the international platform his raised concerns of the spillover faced by Emerging economies as US slowly withdraws its QE programs. Very few central bank governors had the audacity to address issue in the global platform and his repeated it at both Sydney and Washington this very year, where he had a face-off with Mr. Ben Bernanke (the chief architect of QE)

The post of Governor of RBI stands as an autonomous body just like Election Commission, Supreme Court etc. His candidacy was done in a meritorious manner than a namesake. There can be divergence of views between GOI and RBI but the job ultimately calls for fair measures than populist measures that pave way of complacency.

Who and what dictates decisions only time provides the answers, but genuinely he is a rock-star central banker with his sheer demeanor.

Yasmin Banu - Abu Dhabi

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