Fee Fight

The good old days of visiting your bank in a carefree manner for depositing or withdrawing cash are now a distant dream. This is because banks have now started charging for services, including some very basic ones such as deposits and withdrawals, that you used to take for granted earlier.

For instance, State Bank of India, or SBI, India's largest bank, allows just three free cash transactions per month and, thereafter, charges Rs 50 per transaction. The changes were introduced in June last year. Similarly, it has started penalising customers for not maintaining minimum balance in savings accounts. Following SBI, many other public sector banks are also planning to charge for services that were earlier given for free. Most private banks were already charging customers for most of these transactions. The difference now is that they want to pass on all the costs, earlier partially absorbed by them, to customers.

There are many reasons why banks are reluctant to absorb these charges. The first is digitisation. For long banks have been trying to push customers towards online banking and most have been successful in doing that. The much-needed fillip came during the demonetisation period when cashless transactions rose as much as 60-70 per cent, serving as a trigger for banks that were anyways waiting to impose such charges. Second, most banks have, over the past few years, written off huge bad loans from their books, impacting margins. Third, there is a huge cost involved in handling and transporting cash in a secure manner. Four, charges on salary and current accounts are being used to cross-subsidise the cost involved in opening the zero-balance Jan Dhan accounts. These new fees are an attempt to recover some of these costs.

We discuss in detail what you should keep in mind while visiting your bank branch the next time.

Number of Cash Transactions

Cash deposit and withdrawal charges have not been levied for the first time. Earlier also, several private sector banks were charging you for transactions beyond a limit. But during the demonetisation period, between November 8 and December 31, the Reserve Bank of India (RBI) had lifted such restrictions. Now, they have come back, some in a worse avatar. For example, India's biggest private sector bank, ICICI Bank, reintroduced cash transaction charges at branches from January 1, 2017. There are no charges for first four transactions in a month. Thereafter, Rs 5 per Rs 1,000 is charged, subject to a minimum of Rs 150. Till one-and-a-half year ago, too, the bank used to allow four free cash transactions a month, but had restricted the minimum charges to Rs 90. HDFC Bank and Axis Bank have also put restrictions on cash transactions.

"We are charging the amount as people go to ATMs, withdraw cash and give it to somebody, who in turn deposits it in the bank. These type of transactions involve costs which are not known to the public as bankers do not levy any charge on customers. There is a cost involved in transportation, counting and providing security to cash. The cost is borne by taxpayers. There is also a cost in installing ATM machines. We feel these charges are very reasonable," SBI Chairperson Arundhati Bhattacharya recently said in an interview to a media group.

Harsh Roongta, Chief Executive Officer, ApnaPaisa.com, disagrees. "Banks waive off charges when they are in the process of acquiring customers and bring them back when they have acquired enough customers. Recently, some banks brought back a few charges as they have enough liquidity after demonetisation."

And it is not just banks. Even the recently-launched payments bank by Airtel charges Rs 5 to Rs 25 for withdrawal of less than Rs 4,000. For above Rs 4,000, it charges 0.65 per cent of the withdrawal amount, which means the higher the amount the higher will be the fee. Going by these recent changes, it seems the smartest way to manage money is to do it online. Sanjeev Pandey, Senior President, Indian Financial Institutions, Banking, Yes Bank, says, "Banks have started charging in the backdrop of digitisation. This is a welcome move as it will lead to a less cash society."

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What to do

• Use own and other banks' ATMs to spread out transactions
• By spreading out transactions, you can do up to 12 free transactions in a month - five from own bank's ATM, three from other banks' ATMs and four from your bank branch
• Use net banking to reduce dependence on the bank branch. It will save you both time and cost

Non-maintenance Charges

The charges that banks levy for not maintaining the minimum balance have always been a bone of contention between them and their customers. To add to the confusion, most customers are not aware about how the average balance is calculated. Banks also fail to inform customers about this calculation and the penalty for violation.

For example, HDFC Bank charges Rs 600 if the minimum balance falls below Rs 2,500. If the balance is between Rs 7,500 and Rs 10,000, the penalty is Rs 150. ICICI Bank charges Rs 450 if the balance goes below Rs 5,000 and Rs 350 if it falls between Rs 5,000 and Rs 10,000. But remember that different types of accounts have different minimum balances. So, while opening any account, ask the bank about the minimum balance for your account and the penalty for not maintaining it.

In public sector banks, the minimum balances are usually much lower than what private sector banks mandate. SBI, in fact, had in 2012 stopped charging for non-maintenance of minimum balance. Recently, it brought back the penalty for failure to maintain the monthly average balance (MAB) in metro, urban and rural centres. So, in a metro city, failure to keep the Rs 5,000 balance will attract a Rs 50 charge if the shortfall is 50 per cent, Rs 75 if the shortfall is 50-75 per cent and Rs 100 if the shortfall is 75 per cent or more. In urban centres, failure to meet the Rs 3,000 MAB will attract a Rs 40 penalty. This will go up to Rs 60 for 50-75 per cent shortfall and Rs 80 if the shortfall is 75 per cent or more.

Banks calculate the MAB by adding each daily closing account balance and dividing by the number of days in the period.

Considering that a large section of the urban population holds more than one account, remembering different fee structures is not easy. Harsh Roongta says the "problem with bank charges is that there is no cap; the regulator needs to step in."

What to do

• Find out how much minimum balance you need to keep in your account and how much is the penalty if you don't maintain it.
• Find out if the minimum balance has to be maintained on a monthly or a quarterly basis.
• The penalty is imposed for every month the balance is not maintained. It is not a one-time payment.

Home branch Vs Non-home branch

Several banks treat customers of home and non-home branches differently. Different charges are imposed for these two categories of customers.

This means you end up having to be present at your home branch for any large transaction, which goes against the idea of core banking, implemented to serve customers uniformly at any service point.

According to a banking expert, the reason for this distinction is that only the home branch can view the customer's complete profile. Large transactions are discouraged at non-home branches due to security concerns, he says. But the RBI has several times asked banks to stop charging customers for basic services at non-home branches. But the practice still continues. As a result, several banks have put a cap on the value of transactions at home and non-home branches.

For instance, HDFC Bank has capped the amount that can be transacted in the home branch at Rs 2 lakh. Above Rs 2 lakh, it charges Rs 5 per Rs 1,000. At non-home branches, there is a cap of Rs 25,000 per day; above this, customers are charged Rs 5 per Rs 1,000, subject to a minimum charge of Rs 150. Till some time ago, there was no cap on the amount that can be transacted in the home branch without payment of a fee.

To add to the confusion, different banks have different definitions of home branch. In case of ICICI Bank, this means any branch in the same city, whereas in case of HDFC Bank, it is the branch of the city where the account has been opened.

Are such charges justified? A report prepared by Ashish Das, a professor at IIT-Mumbai, states: "The RBI should implement the monetary policy regulatory stance in spirit. Thus, with a view to ensuring that bank customers are treated fairly and without any discrimination at all branches of banks/service delivery locations, the RBI should mandate banks to follow a uniform, fair, transparent and non-discriminatory pricing policy for customers at home and non-home branches so as to justify that the cost to provide the service is branch/customer is agnostic in principle."

What to do

• Till the time the regulator takes action, you will have restricted access to non-home branches
• If you have changed your address or shifted to another city, it is always good to change your home branch as well.

Home and Non-home ATMs

ATM charges are set by the RBI and are uniform. Rules mandate at least three fee transactions per month from ATMs of other banks and five from ATMs of own bank in metro cities. Banks charge Rs 20 per financial transaction and Rs.9.55, including tax, for every non-financial one beyond this limit.

What to do

• Use both own and other banks' ATMs. You can get 8-10 ATM visits free in a month.
• Use debit cards, credit cards, mobile wallets and UPI-based apps for transferring and making payments.

With banks charging you for more and more service, being vigilant is the only way to tackle these pesky charges.