In the first part of this two-part series we identify certain basic services rendered by every bank, and ensure that these services are offered free of all charges across the board, so that every customer is treated fairly, equitably and in a non-discriminate manner
The Reserve Bank of India (RBI) in its master circular on customer service in banks issued on 1 July 2011 has highlighted the need to empower the depositors in the following words:
“Depositors' interest forms the focal point of the regulatory framework for banking in India. There is a widespread feeling that the customer does not get satisfactory service even after demanding it and there has been a total disenfranchisement of the depositor. There is therefore, a need to reverse this trend and start a process of empowering the depositor.”
Further, RBI in its annual monetary policy for 2013-14 announced earlier this month has, inter-alia, stated that they would issue detailed guidelines by the end of June 2013 with regard to uniformity in Intersol charges levied by banks.
Intersol charges are those levied by banks for using the service of branches other than the home branch, where you opened your account. With the introduction of core banking solution (CBS), many banks have been proclaiming that when you open a savings account with a branch, you become the customer of the whole bank and not of any one single branch. This means that with the use of technology, the benefit of service at all the branches of the bank should be available to you, though technically, your account is maintained in one particular branch, where you opened the account. This is what they call as “anywhere banking”.
Here is what the RBI had said in its monetary policy statement earlier this month with regard to intersol charges:
“With the introduction of Core Banking Solution (CBS), it is expected that customers of banks would be treated uniformly at any sales or service delivery point. It is observed, however, that some banks are discriminating against their own customers on the basis of one branch being designated as the “home branch” where charges are not levied for products services and other branches being referred to as “non-home” branches where charges are levied for the same products/services. This practice is contrary to the spirit of the Reserve Bank’s guidelines on reasonableness of bank charges. With a view to ensuring that bank customers are treated fairly and reasonably without any discrimination and in a transparent manner at all branches of banks/service delivery locations, banks are advised to: follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches.”
However, banks in their anxiety to increase their fee-based income have been overtly and covertly flouting the guidelines of RBI and are levying charges indiscriminately for several services, which are neither fair nor equitable. For example, you can get your pass book updated at your home branch without any charges, but if you get the same pass book of the same account updated in another branch of the same bank, which is now possible under the CBS, many banks levy a charge for rendering such a service. This is being frowned upon by the RBI as it is discriminatory and against the spirit of RBI guidelines on reasonableness of bank charges.
As a step towards removing this discrimination, it is necessary for the RBI to identify certain basic services rendered by every bank, and ensure that these services are offered free of all charges across the board, so that every customer of a bank is treated fairly, equitably and in a non-discriminate manner.
The basic banking services can be divided into three parts:
1. Mandatory services: There are a number of services, which compulsorily go with the maintenance of savings bank and current accounts and in all fairness. These services should be made available to all banks’ customers without any charges. While opening an account is currently free, banks do charge a fee for closing the account within a certain period. A customer should have freedom to open and close the account whenever he wants, as it is the basic right of an individual to close an account if and when he finds that the services offered by the bank are not up to his expectations. In fact while opening the accounts, banks stipulate certain conditions for customers to follow, but conveniently omit to state their own obligations towards the customer.
All services extended through the use of core banking technology (CBS) must be mandatorily offered free to every customer, as it does not add to the cost of operations of the bank. It is obvious that rendering a service at any of their branches (non-home branches) is equivalent to offering the same service at the home branch. Whether depositing or en-cashing a cheque, writing a pass-book or issuing a statement of account, transferring funds from one account to another in the same bank but in different places and whether collecting a cheque from another bank or paying a cheque in another place are part of the core banking activity and should be compulsorily available to all bank customers in all their branches free of all charges. The purpose of CBS is defeated if the benefits of such modern technology are not made available to the depositors free of cost at all branches of the bank.
There are many other services like issuing an ATM-cum debit card, accepting standing instructions for payment of utility bills through ECS, etc are all basic banking services, which should be available to all bank customers without any charges. Banks today charge fancy rates for all these services, without any regard for the convenience of the customers and without any relation to the cost involved in offering these services.
There is, therefore, a need to codify all the basic banking services that deserve to be made available free of cost by all banks and RBI should not only come out with list of such basic services but also instruct banks to offer these services without any charges in the interest of transparency and fair treatment of bank customers.
2. Services that relate to security and safety of bank accounts: All the banks have a sacred duty to safeguard the interest of all customers by ensuring safety of their money and security of their accounts by virtue of having undertaken to accept their deposits and hold it in trust for them. It goes without saying that banks are obliged to keep the customers informed of all that affects their interest and this service should be offered without any charges to every customer of the bank.
There are a number of services which go to preserve and protect the interest of depositors. For example, communicating a customer when a certain amount is withdrawn from his account is a security measure that helps banks to prevent frauds. As this service is beneficial to both, the bank and the customer, it is certainly unreasonable to levy a charge on such a service offered to the customer.
Recently it was pointed out by a Moneylife reader that one leading private sector bank has put up on their website a notice that from 1 May 2013, they would levy a charge of Rs15 per quarter for the SMS alert facility offered by the bank. Is this fair to the account holders when the intention of the bank to send such a message is to prevent frauds in their backyard? The RBI should identify all those services, which are in the nature of securing the safety and security of customers’ accounts and ensure provision of such services free of cost to the customers of all banks.
3. Services to senior citizens and or disabled persons: Senior citizens and disabled people need a wide variety of services from banks to enable them to lead a life of dignity. They deserve special treatment at the hands of all banks purely from the humanitarian angle. There is a need to identify all those specialized services that are required to be provided by banks to such deserving people without any charges to make their life a little more bearable and livable in these days of rising cost of living due to the stubborn inflation plaguing the country.
For example, banks levy a penalty for withdrawing a deposit before maturity. Banks levy a charge for not maintaining a minimum balance in the account every month. Banks do levy a charge for issuing a duplicate pass book when the original is lost. These and a host of other types of charges can certainly be waived for senior citizens and or disabled account holders as a token of service to these people, who deserve help and assistance due to their old age and or disabilities.
Need to empower the bank depositors: Unfortunately, the objective of the RBI to empower the bank depositors has remained only in paper, as nothing much has been done to empower them during the last two years and the level of customer service in both public and private sector banks has deteriorated further. This is one of the reasons why the rate of growth of bank deposits has been falling year after year and the savings rate in the country has fallen considerably over the years as people prefer to invest their surplus funds on gold or immovable property, instead of keeping with unhelpful banks.
The RBI should, therefore, now take up the cause of depositors in right earnest not only in the interest of improving the savings rate in the country, but also with a view to restore the trust of the public and get their patronage before grating new banking licenses, as banks have lost the confidence of the general public due to their callous attitude towards the customers and the recent exposures of unhealthy practices in the functioning of commercial banks in our country.
(The second part of this two-part series on “Empowering bank depositors” which suggests compensating bank depositors if they fail to get the service they have the right to expect, will appear tomorrow.)
(The author is a banking analyst and writes for Moneylife
under the pen-name of Gurpur