In another example of cartelization among bankers, several banks have increased or started imposing charges for transaction alerts through SMS as well as for mobile banking. As usual, private lenders have taken the lead, which soon would be followed by nationalized banks

There is no free lunch says a popular adage. Our banks, having lured consumers with ‘free’ services, have now started charging for them or hiking already existing fees to fatten their bottomlines. So far this year, many banks have started charging for SMS alerts on transactions and hiked the annual fees on debit/credit cards. A few banks have even increased charges to deposit cash in your accounts. The list includes large banks such as ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank and Canara Bank. Here are some areas in which charges have been increased.

SMS Alerts: Over the past month, almost all banks have begun to charge for SMS alerts on transactions.

Axis Bank sent an SMS to its account holders which states that “From 15 June 2013 this (SMS banking) service will be charged Rs5 per month”. ICICI Bank is charging Rs15 per quarter. Interestingly, both amount to an identical Rs60 per annum giving rise to the suspicion that banks, working through the Indian Banks Association, decide to hike rates in tandem or to a pre-decided plan. 

State Bank of India (SBI) is providing various services like MobiCash, mobile banking and SMS banking free of cost. Other state-run lenders like Punjab National Bank (PNB), Bank of Baroda (BoB) and Canara Bank are also providing SMS banking and mobile banking services free of cost.

(Update: As of 1 July 2013, both SBI and PNB decided charging Rs15 per quarter for SMS alert services. PNB, however, said, accounts of senior citizens, its staff-in service and retired and students, will be exempted from this charge)

When asked, an Axis Bank executive said whoever is subscribed to their SMS banking services will be charged Rs5 per month. He said, whoever chooses to unsubscribe from (to unsubscribe customers have to visit branch personally) their SMS Banking services will not be charged anything. Clearly, the banks are testing the ground. Nobody is likely to unsubscribe at a time when SMS alerts have helped protect part of the money.

ICICI Bank notifies on its website “Please note with effect from 1 May 2013 all savings account customers availing alerts facility through an SMS will be charged Rs15 per quarter (inclusive of taxes)”. However, ICICI Bank has kept the facility free for accounts such as salary account, senior citizen savings account, silver savings account and privilege banking.

HDFC Bank notifies on its website, “Effective 1^stApril, customers registered for InstaAlert service with ‘SMS’ as the alert delivery channel, would be charged.”

HDFC Bank customers registered for InstaAlert service through ‘SMS’ are charged Rs15 per quarter for salary or savings accounts, while customers who hold current account are charged Rs25 per quarter.

However, HDFC Bank said, InstaAlerts delivered through emails would remain free. Interestingly debit or credit card transaction alerts sent as per regulatory guidelines and net-banking transaction alerts are not covered in the HDFC Bank InstaAlertservice. Customers who are not registered for InstaAlert service will continue to get these alerts free of charge, according to HDFC Bank.

While all private sector lenders have increased charges for SMS alerts, Kotak Mahindra Bank has decided to reduce its already very high charges. This reduction would bring the rates at par with other banks. It notifies on its website “for savings account holders: The daily balance SMS alert that costs Rs200 per annum will be reduced to Rs120 per annum while SMS for weekly balance, transactions and value added alerts will cost Rs60 per annum from Rs75 per annum with effect from 1^st July.”

Yes Bank, which offers up to 7% interest on saving accounts, is charging Rs10 per month to their basic saving account (smart salary) holders. While other account holders would continue to get transaction alert messages free of cost.

Kotak and Yes Bank, pays a higher interest on savings account balances above Rs1 lakh. But it seems both were clearly charging significantly more for other services. Even today, at Rs120 per annum, the charges are double than that of ICICI, HDFC Bank or Axis Bank.

Debit Cards:

Banks from the private sector also started hiking annual fees for debit or ATM cards. Among the state-run lenders, except Canara Bank, no other bank has increased the fees. From 1^st July Canara Bank would charge Rs112 as annual fee for its debit cards issues to all customers, except holders of small savings account, basic savings account and financial savings account.

SBI is charging Rs102 annual fees on all debit cards, except Yuva International debit card. PNB is charging Rs112 and BoB is levying Rs113 as annual fees or maintenance charges on debit-cum-ATM cards.

Axis Bank has increased the annual charges by 50%. It would charge Rs150 instead of Rs100 as annual fee from its debit card users in metro and urban centers. For bank account holders from semi-urban and rural, the same is revised to Rs100 from Rs50. In addition, all prime salary account would be charges Rs150 as annual fee for a debit card. Axis Bank has also increased card issuance fee for all its customers to Rs150 from 1^st May.

While ICICI Bank is charging Rs99 for gold or silver debit cards and Rs250 for business banking debit card, HDFC Bank charges between Rs100 to Rs500. Kotak Mahindra Bank is charging between Rs100 to Rs750 for platinum debit card, as annual fees.

Yes Bank has already increased the charges from November last year. The Yes Business Gold Debit Card has become costlier by Rs150 following the increase. The annual fees for the card are now Rs499. There is no annual fee on the debit card for the bank’s basic savings account holders.

Annual fees charged on ATM/debit cards

The increase in banking charges is contradictory to the stand taken by the regulators. Earlier this month, while speaking at an Open House organized by Moneylife Foundation, Dr KC Chakrabarty, deputy governor of Reserve Bank of India (RBI) has said that the decision on various charges levied by banks has been left to their respective board of directors while the Indian Banks Association oversees the reasonableness aspect and can suggest a cap on the charges.

Mohan Siroya, chairperson of the Consumer Complaints Cell (CCC) had said, "The ‘greatest wrong’ the Reserve Bank of India (RBI) has committed is by disowning its responsibility to supervise the ‘exploitation’ of bank customers. RBI has given the full liberty to each bank to levy ‘service charges’ as per their wish. It has become an open market. Now it has come to the light from the Banking Codes and Standards Board of India (BSCBI) that the Indian Banks’ Association (IBA) has been given an authority to put a 'cap' on such charges, thus fully abdicating its own duty as a statutory regulator. How is such a body expected to control the greed of making more and more money by its own members?”

Adding to Mr Siroya's view, Sucheta Dalal, trustee of Moneylife Foundation said, “The IBA operates in a particular pattern. When one bank decides to charge Rs500 for a debit card, the others, especially nationalised banks, follow its lead and say; okay we will charge only Rs250. This is how banking charges increase every time. Competition does not work because IBA has become a cartel. When was the last time that IBA spoke to any consumer organization or sought the consumers’ views?”

Ashok Ravat of All India Bank Depositors Association (AIBDA) and Vasundhara Deodhar from Mumbai Grahak Panchayat (MGP) also raised questions on the reasonableness of banking charges. Both requested the banking regulator to determine reasonable service charges.

Interestingly, while consumers are increasingly complaining about reasonableness of bank charges, the banks themselves are lobbying hard with the RBI, claiming that high cost of technology is making each transaction very expensive. For instance, having encouraged and pushed to obtain corporate accounts of companies, banks are now cribbing about high  transaction costs on small withdrawals from ATMs.

For instance, a senior central banker says that each balance inquiry costs the bank Rs11 while each transaction costs around Rs18. However, this calls for a serious discussion on the cost-benefit of technology to consumers, since the solution cannot be to load higher costs on to consumers.

The frequent hikes in service charges are fast reaching a stage where consumers will revolt. The Reserve Bank of India (RBI), which follows a policy of forbearance (allowing bankers to decide charges themselves) with regard to service charges, refuses to intervene. At the same time, the RBI is pushing banks to extend services to hundreds of million unbanked Indians. There is a clear disconnect here, since no-frills accounts permit only ATM transactions and banks now claim that those too involve a huge cost.

Can the RBI afford to remain silent about rising service charges? It is a question that the banking regulator needs to answer.