All public sector banks (PSBs) and major private sector banks have collected Rs35,587.68 crore from customers since 2018 for not maintaining minimum average balance (MAB), conducting additional transactions on automated teller machines (ATMs) and SMS services, the government told the Rajya Sabha. Interestingly, from March 2020, State Bank of India (SBI), the country's largest lender, had waived the penalty for non-maintenance of MAB for all savings bank accounts.
In a written reply, Dr Bhagwat Karad, minister of state for finance, says, banks, through a master circular issued by Reserve Bank of India (RBI), are permitted to fix penal charges regarding non-maintenance of minimum balance in savings accounts, as per their board-approved policy while ensuring that all such penal charges are reasonable and not out of line with the average cost of providing the services.
Dr Amee Yajnik, a member of Parliament (MP), has asked for information about cumulative charges imposed by scheduled commercial banks (SCBs) for non-maintenance of minimum balance and the total amount charged by SCBs for additional ATM transactions and SMS services carried out since 2018.
The MP also asked about the steps taken by the government to regulate the service charges levied by the banks and whether the government proposes to set up a system to regulate and monitor the charges levied by banks.
In reply, Dr Karad, the minister of state, says RBI has advised banks to ensure reasonableness and equity in the charges levied by banks for sending SMS alerts to customers and to leverage the technology available to them and the telecom service providers to ensure that such charges are levied on all customers on an actual usage basis.
Further, as per an RBI circular issued on 10 June 2021, bank customers are eligible for five free transactions, inclusive of financial and non-financial transactions, every month from their own bank ATMs. They are also eligible for a fixed number of free transactions, inclusive of financial and non-financial transactions, from other bank ATMs, such as three transactions in metro centres and five transactions in non-metro centres. Beyond the free transactions, charges are levied for each ATM transaction and the ceiling or cap on customer charges is Rs21 per transaction from 1 January 2022, Dr Karad says.
MAB or monthly average balance is the minimum amount a customer needs to maintain in her savings account each month to avoid being penalised by the bank. For example, if a bank offers a savings account that has Rs20,000 as MAB, then the customer must maintain an average balance of Rs20,000 or more every month, otherwise, she would be charged a fall-below fee.
According to Dr Karad, the Union government and RBI have taken various steps for the availability of affordable banking services to the poorest sections of society. As per extant guidelines of RBI, some basic minimum facilities are being provided under basic savings bank deposit account (BSBDA), including accounts opened under pradhan mantri jan dhan yojna (PMJDY) for common people free of charge and without any requirement for maintaining minimum average balance in the account.
In 2013, Moneylife surveyed charges levied by banks. While banks argue that customers must pay for the convenience of modern banking, the survey found a growing sense of frustration among customers about the constant, stealthy increase in bank charges.
The findings of
Moneylife's survey on banking service charges explained exactly why banks get away with it. As in almost everything else, we found that they ride on consumer trust, apathy and ignorance. While a large discerning group is aware and angry about the slew of new charges, a shocking 60% of respondents were unaware of various charges and have never checked if their bank announces them transparently. Over 71% of account holders do not want to change their bank for various reasons—and this is the answer to why banks are able to hike bank charges with such impunity. (
Read: Wake Up to Your Bank Charges)
As pointed out by Moneylife in 2018, ATMs are another source of fleecing bank customers. Banks charge for ATM transactions (beyond a minimum threshold) on the plea that it costs them Rs15 per transaction. However, they accept no responsibility for ATMs that do not work, run out of cash, or cap withdrawals (especially on holidays), forcing customers to make repeated transactions.
SBI reintroduced minimum balance charges in April 2017 after five years of waiving it. The penalty for not maintaining a minimum balance was the cause of much heartburn, as fines were levied on those who did not have enough money in their accounts.
In a statement in March 2020, SBI says, "The charges on maintaining AMB are now waived off on all 44.51 crore SBI savings bank accounts. Currently, SBI savings bank customers need to maintain an AMB of Rs3,000, Rs2,000 and Rs1,000 in metro, semi-urban and rural areas, respectively. Bank used to levy a penalty of Rs 5 to Rs 15 + taxes on non-maintenance of AMB." (
Read: SBI waves off average monthly balance on all savings bank accounts)
SBI, however, levies SMS charges every quarter for debit card-holders who fail to maintain an average quarterly balance of Rs25,000 during the quarter.
