The charge machine

The business and saving bank accounts that Chennai-based V. Selvakumar (30), maintains with State Bank of India, ICICI Bank and IndusInd Bank have been giving him the blues for the past 24 months. Many banks have hiked various charges and, in some cases, introduced new ones like counting charges on a large cash deposit or withdrawal. As his transactions were many, Selvakumar was informed by one of his banks that it will not be able to issue “so many cheques” for free and that he would have to pay additional charges for them. At times, he forked out counting charges to withdraw his own cash, and large transfer charges to remit money to another city. Little wonder, the Coimbatore-based fastfood joint owner is perturbed. “The banks say we are getting personalised banking, but it’s the banking charges that are getting personalised,” he says.

Welcome to high-cost banking. Banks are increasingly finding new ways to make you pay for their services. Even for a basic service, such as requesting an additional account statement, banks may charge a fee of Rs 250-500. You also have to pay extra as cheque-issue charges when your account slips below the stipulated minimum balance. Then, banks have hiked charges for bounced cheques, and cheque collection in the last year. One good news is that cash withdrawal from any ATM will be free of charges from April 1, 2009.

Fees or fleece? How banks charge you more.
Minimum balance: If you don’t maintain a minimum stipulated balance in your bank account, banks will charge a hefty fee. Lately, many private banks have hiked the quarterly average balance (QAB) requirement from Rs 5,000 to Rs 10,000 per quarter while some foreign banks have a higher QAB requirement. This charge is steep and varies from Rs 750 to Rs 1,500.

Chequebook: Banks usually provide chequebooks free if you use less than 10-12 leaves per quarter. If you need more cheques or have an urgent requirement for an additional chequebook, banks charge Rs 50-300 per chequebook.

Cheque return charges: Among the most expensive fees is the bounced cheque charge. A few private banks have lately hiked this charge from Rs 250 to Rs 350. Account statements. All banks have to provide free quarterly statements. If you require more statements or a duplicate statement, the charges vary between Rs 50-500 per statement.

ATM charges: If you use the ATM of another bank for cash withdrawal, you will be charged Rs 20 per transaction. This service, however, will turn free from April 1, 2009.

Debit card fees: Banks should usually offer ATM cards free, but many have stopped issuing ATM cards altogether. Instead, they issue a combo ATM-cum-debit card, for which they charge Rs 100 per annum.

Other charges: Banks also charge you for outstation cheques clearing, demand drafts and stop-cheques. These charges attract a further service tax of 12.3 per cent.

K.V.S. Manian,

The issue of fees
For banks, fee-based income is an important source of revenue. Besides, transaction costs have increased thanks to the costs incurred on deploying core banking software, installing ATMs and the rising delinquencies or nonperforming assets.

Before you open an account, look up the charges mentioned on the bank’s website. In general, large, new-generation private sector banks charge more than smaller private banks and public sector banks. Almost all offer facilities such as Internet banking, demat accounts etc., and so a bank that has a responsive help desk should be considered—you can then compare the charges of the banks in your vicinity.

On the other hand, some services could be crucial for your requirement. If you prefer cheque pick-up, cash pick-up and drop facilities, opt for a bank offering home banking facilities. Be prepared to have a large minimum deposit in your savings account. Most banks offer a “sweep” facility where idle cash gets transferred to flexi-term deposits earning higher interest. Some services are reserved for high networth individuals, such as trust and estate planning, for which the charges are quite high, but vary between banks. Says K.V.S. Manian, Group Head Retail, Liabilities, Branch Banking, Kotak Mahindra Bank: “Customers require need-based services, so transaction costs are there to stay.”

Online banking, with the RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer), which have rates stipulated by RBI, are enabling smaller banks to compete better with their large counterparts, and fare much better on overall charges as well as an array of services, such as bill payment facilities. Please note, an ECS debit with your utility provider could be a cheaper option.

Some banks also provide a no-frills or zero-balance account with cheque facilities, a great idea for people with average banking transactions. (You may not get a multi-city personalised chequebook, though, but then, you may not need this). But watch out for not-so-openly stated caveats. “State Bank of India, for instance, demands a fixed deposit of Rs 5 lakh in Coimbatore to give you a locker,” says J. Karthikeyan, Certified Financial Planner and Director, Finerva Financial Solutions.

At the end of the day, decide on the services you want and match those with the bank’s ability to fulfil the same efficiently— that will ensure you don’t cry all the way from the bank.

How to Lower the Burden • Avoid banks that require you to maintain a hefty balance in savings account. Sign up for low balance alerts. • Bank online wherever possible. This feature generally has zero or very low fees. • Maintain all your bank statements, and keep a copy to avoid additional charges for duplicate statements • Don’t maintain too many bank accounts as keeping track will be difficult. • Don’t sign up for any service or transaction unless you know the cost involved. If a service is free, check its service tenure. • Don’t sign on a cheque if you are unaware of the outstanding balance. Bounced cheque charges have increased. • Don’t hesitate to negotiate your transaction fees with the bank. Banking is a competitive business, and banks will be willing to lend a helping hand.