Minimum balance: Better to maintain than risk high fees

Apr 07 2014, 09:44 IST
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If banks adhere to the RBI advisory and stop penalties, they would end up charging more for services. (AP) If banks adhere to the RBI advisory and stop penalties, they would end up charging more for services. (AP)
SummaryIf banks adhere to the RBI advisory and stop penalties, they would end up charging more for services.

for rural.

THE RBI ADVISORY

The central bank’s move comes over three years after a committee set up by RBI, “Committee on Customer Service in Banks” under the chairmanship of M Damodaran submitted its report in 2010 where among other things it called for a check into imposition of penalty by banks for not maintaining the minimum balance.

“Banks should inform the customer immediately on the balance in the account breaching minimum balance and the applicable penal charges for not maintaining the balance by SMS/e-mail/letter,” the committee argued in the report adding that the penal charges levied were not in proportion to the shortfall observed.

In line with the committee’s recommendation, RBI last week told banks not to levy charges on its customers for not maintaining the minimum balance and also advised them not to levy penal charges for non-maintenance of minimum balances even in inoperative accounts.

It, however, told the banks that in case the customers do not maintain the minimum balance they can alternatively go ahead and limit the services in line with what is available to basic savings bank account as against that available to a regular savings bank account.

If that happens, all cheque books after your first one will become chargeable and even cash withdrawal at branches beyond a certain number of transactions will become chargeable. There are other benefits that the banks may withdraw.

MAINTAIN THE BALANCE

While RBI may have asked the banks not to levy any such charge, customers should try to maintain the mandated minimum balance. Bankers say that by not keeping the minimum balance in their regular savings accounts the customers may end up paying more— services available to a customer including account statement, several ATM transactions, cheque books issuance and number of withdrawals may become chargeable.

Aditya Puri, MD, HDFC Bank said, “The consumer will end up paying more in the alternative. Let us say minimum balance is Rs 10,000 and we earn 4 per cent on it. For Rs 400, we give you cheque books for the full year, ATM transactions, we give you the account balance and the statements. Break-even for the bank to provide those services is Rs 30,000. If you have consumer interest in mind, you will not push this because the alternative is then you are charged for these services. If I start charging you for these services, you will end up paying more. It is implied that if you don’t charge on

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