Banking services are going to be easier and cheaper with banking regulator Reserve Bank of India (RBI) recently asking banks to bring in uniformity and transparency in fixing service charges. The RBI move has come at a time when banks have been charging different fees for services like depositing cash and encashing cheque,discriminating between their customers at home branch and non-home branches.
The RBIs contention is that if a particular service is provided free at home branch (where the account holder opened his/ her bank account),the same should be available free at non-home branches also. The central bank said in a notification last week that there should be no discrimination as regards intersol charges between similar transactions done by customers at home branch and those done at non-home branches. In other words,if your bank is not charging you anything for depositing Rs 40,000 in your home branch in Delhi,he should be able to deposit the same amount free of charge in a Mumbai branch as well.
For cash deposit at a non-home branch,Punjab National Bank charges Rs 2 per Rs 1,000 with a minimum of Rs 25 per transaction. It charges Rs 1 per thousand beyond Rs 25,000 for cheque encashment. For cash withdrawal at non-home branches,PNB charges Rs 2 per thousand beyond Rs 50,000 per day. All these services come free at the customers home branch.
In the case of ICICI Bank,for cash deposits,first transaction in a month is free and then Rs 5 per thousand subject to a minimum of Rs 150. For withdrawals in a non-home branch,first transaction in a month is free and then Rs 5 per thousand subject to a minimum of Rs 150. For State Bank of India,theres a charge of Rs 2 per thousand with a minimum of Rs 10 per transaction for cash deposits in non-home branch. Ditto is the case with other banks. While there are no charges in their home branch for cash and cheque deposits and withdrawals,they end up paying a fee in non-home branches.
The banking regulator acted on the recommendation of the Damodaran Committee on Customer Services,which observed a general discontent among all the strata of customers about charges levied by banks for getting services at non-home branches like pass-book updation,cash deposits etc. It agreed with the argument of the Damodaran panel that under the core banking solution (CBS) environment,these charges are not justified. CBS essentially helps in integration of the range of services that can be offered by all the banks branches from centralised data centres. CBS has enabled banks to bring down costs and make various services faster. Banks have already implemented CBS in their branches across the country.
New delivery channels for customers like internet banking,mobile banking,mobile automated teller machines (ATMs),multi-functional ATMs,shared ATM services,large scale usage of Real Time Gross Settlement (RTGS) for quick,immediate funds transfer and smart card based cards as part of initiatives aimed at financial inclusion were introduced,improving customer services using such innovative systems. However,even after introducing new technology that made banking services faster and cheaper,banks continued levying intersol charges on third party banking transactions at non-home branches.
According to RBI officials,the earlier regulatory prescription that charges should be reasonable had not achieved its purpose and proper pricing of these basic banking services,especially for lower category of customers,had not been addressed. With the introduction of CBS,it was expected that customers of banks would be treated uniformly at any sales or service delivery point. Some banks were discriminating against their own customers on the basis of one branch being designated as the home or base branch where charges are not levied for products/ services and other branches of the same bank being referred to as non-home branches where charges are levied for the same products/ services, the RBI said.
On the impact of the RBIs directive,a nationalised bank official said,it was waiting to happen. There wont be much impact. There are some who took it on themselves and did so even before RBI asked them to do so and Axis Bank is one of them. Axis Bank had moved this even before the directives from RBI as we believed that it was the right thing to do for our customers, said Rajiv Anand,president,retail banking,Axis Bank.
How are the banks saving money? In the CBS environment,cheques can be paid at any location obviating the need for their physical movement to the drawee branch. The RBI also facilitated speedy clearing. The concept of speed clearing combines the advantages of MICR clearing with that of CBS. Cheques drawn on outstation CBS branches of a drawee bank can be processed in the local clearing under the speed clearing arrangement if the drawee bank has a branch presence at the local centre. The local cheques are processed on T+1 working day basis and customers get the benefit of withdrawal of funds on a T+1 or 2 basis. T denotes transaction day or the date of presentation of cheque at the Clearing House. The outstation cheques under speed clearing will be paid within one or two days. Speed clearing is now available in 1,300 centres across the length and breadth of the country.