Finance ministry withdraws its controversial diktat to levy processing fees on payment of credit card dues by cheque or cash

Moneylife Impact: The finance ministry’s strange and controversial diktat to public sector banks to emulate HDFC Bank and levy processing charges on payment of credit card dues by cash or cheque was exposed and followed by Moneylife alone. The rest of the media, including the business press is still silent on this issue

In a letter dated 12th March, the finance ministry has quietly withdrawn its ‘fatwa’ to “consider charging a processing fee from customers paying credit card dues either in cash or through cheque”.  In fact, this letter too is written by the same DD Maheshwari, Under Secretary at the Department of Financial Services, who sent out a fatwa marked “most immediate” to all chief executives of public sector banks on 25 October 2012. This time he writes that the letter “stands withdrawn with immediate effect. This has the approval of the Secretary (FS)”.(see letter here)

The finance ministry’s decision to withdraw the letter is a very positive development from the customer’s point of view. It not only means that banks will not be charging this absurd processing fee, but also reveals that the finance ministry is sensitive to public opinion. Our report (Read: Now, penalty for paying credit card dues by cheque! ) had created a furore among depositors and has been the most read, most shared and most commented article on for the past fortnight. So what was the anger about?

Well, the finance ministry had not only asked for such a processing fee to be levied, but held HDFC Bank as the example to emulate. It specifically mentioned how HDFC Bank had doubled its charges for cash transactions from Rs50 to Rs100 per transaction. It had also asked banks CEOs to report their action taken to the ministry.

What was particularly outrageous about the finance ministry’s micro-management of fees charged by banks was that the Reserve Bank of India (RBI), which is the banking regulator, is in the process of ‘considering’ the comments to a similar report that it had issued on “dis-incentivising cheque transactions” by levying a slew of fees and charges on everybody who issues or deposits a cheque. Please read RBI Must Scrap No Cheque Idea, which is the most commented article in Moneylife since then.

Moneylife Foundation, our sister entity which has over 21,500 members, had sent a strong memorandum to the RBI asking it to scrap the report in toto. (Moneylife Foundation demands scrapping of the move to penalise usage of cheques ). We have since learnt from another activist that the RBI has received at least 300 representations against this plan. In fact, leading NGOs in Mumbai are scheduled to meet on 21st March to discuss a joint plan to oppose such a move. Those who are attending the meeting include the Mumbai Grahak Panchayat, All India Bank Depositors Association, Consumer Guidance Society of India, Moneylife Foundation, Council for Fair Business Practices, Consumer Complaints Cell and Save Our Lands. The All India Bank Employees Association is also participating in the discussion.

Moneylife columnist Gurpur, a senior banker, had also pointed out how a country like the United Kingdom had bowed to public pressure given up the idea of abolishing cheque usage. See UK govt bows to public pressure—rejects abolition of cheque system. Will RBI follow suit?  And even superpowers like the US, who are way ahead of India in terms of adoption of information technology, continue to use cheques.

Amit Bhargava
9 years ago
After the Money Life exposed the "fatwa" from the Finance Ministry, the same under secretary Most Immediately issues another letter, but "Chupke Se".

Good job Money Life !
nagesh kini
9 years ago
Pray can the Hon. FM clarify as to who is the Regulator?
The RBI at Mint Road, Mumbai or a babu sitting at Parliament Street New Delhi? How much does this guy who must have just come to the MOF after some remote posting know of banking to pass such hare brained fatwas quoting just one bank as the role model?
The so-called dis-incentivization for cheques is another crazy move that needs to be scrapped lock, stock and barrel as it does not suit Indian conditions.
9 years ago
Really, money life is doing great to the society, hope the best for future also.
9 years ago
Great,keep it up!
Sankara Narayan
9 years ago
Congrats , Money life for the excellent work. It once again proves that these babus dont have any touch with social reality. Even many educated have become tecnophobes! , not wanting to use internet even for email communications . The various types of net scams make them more unsure . Such being the reality , Thuglaks are in their own world issuing such'fatwas' !
Replied to Sankara Narayan comment 9 years ago
Agree, because all work I feel is done with some preconceived notions in mind.
9 years ago
It was a Tughlakhi idea and was bound to be withdrawn. Hope, the Babus spend their time to bring out some really meaningful and sensible ideas.
They must have spent lot of time in drafting same. Also Moneylife etc. had to waste their valuable time & energy in opposing such meaningless dictats.
Hystaspes F Engineer
9 years ago
"HEART CONGRATS" to the while ML team for launching the timely campaign and achieving a rather quick success. Keep-up to your good work. Now, the fight for the 'cheque abolition system' need to be ably pursued. These are short sighted immature moves of the govt. m/c which need to be nipped in the bud spontaneously. "ALL THE BEST".
9 years ago
It is really good, MONEY LIFE TEAM has shown what it can do for the benefit of consumers.
Ramesh Iyer
9 years ago
Congratulations to MoneyLife team for having highlighted this matter incessantly, building huge public opinion against this impractical decision by the govt's earlier note. While I would agree with RBI & MoF on encouraging people to adopt tech-based facilities on which Banks have invested millions, they can't ignore the fact that there are plenty more who don't have access to such facilities in the first place. In fact, even in urban areas, where ALL Banks have setup much of their IT-enabled infrastructure, like ATMs, it is not uncommon to find many of them even right outside the Branch not functioning. Hence, while people would love to embrace facilities which makes it convenient for them, penalizing for Banking the traditional way is too harsh and impractical, considering how few customers are IT-savvy (of the large customer-base).
jaideep shirali
9 years ago
Congrats to the Moneylife team for getting consumers the right they deserve. Certainly the RBI does not know what it is doing, because just recently, they insisted on a new format of cheques. So we would have banks sitting with an inventory of pre-printed chequebooks and customers who do not wish to use them, because of the charges.
Replied to jaideep shirali comment 9 years ago
Mr Shirali

As per our knowledge and directives of RBI , at least all savings bank holders are supposed to get the new CTS cheque books without paying any charge. Have you paid or is your bank is asking? In fact we have cases, where even Current account holders got replaced the non-CTS CQ folios without paying any charge.
Perhaps the Consumer Complaints Cell may help you if U send the details to them on [email protected] or to me
MOhan Siroya
Vinita Deshmukh
9 years ago
Absolutely brilliant Sucheta and Debashis. v v proud of both of you. The best example of pro-active, pro-citizen financial journalism! Kudos.
9 years ago
Kudos and Hearty Compliments to you Sucheta and our "MOney life" for taking up this issue vigorously. Perhaps, it was 'Fait accomply" for the Govt./RBI as the repurcussions of this 'Regressive and Repressive' step would have waned away a large chunk of voters to the UPA parties, especially the Congress .
"Money Life" should Keep up to take cudegels against such high public importance causes.

Mohan Siroya
Vaibhav Dhoka
9 years ago
congratulations and good impact for united action.
Nihar Mody
9 years ago
If RBI insists on non usage of cheques, It shold also take full resposibilty for online frauds. Are they ready for it?
Suiketu Shah
9 years ago
Excellent work Ms Dalal,Mr Basu and all at ml:)
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