The Ministry of Finance announced yesterday that, no public sector bank has increased the bank charges and will not do so in view of the COVID pandemic. The announcement came after strong backlash to Bank of Baroda reducing the number of free deposits and withdrawal from five times to three. Bank of Baroda has decided to withdraw its decision of reducing the allowed number of free transactions per month from five to three and Ministry also said that other public sector banks are not planning to raise bank charges in near future seeing the current situation due to COVID pandemic.
The sudden statement by the Ministry of Finance appears more to be a move to silence the media news and rising doubts in the minds of people about bank charges than a positive step to ease the pain of bank customers in the current financially stressed time due to COVID pandemic. The announcement claims that banks have a right to levy charges and are not wrong in doing so. It says banks are “permitted to levy charges for their services in a fair, transparent and non-discriminatory manner” but bank charges are neither fair nor transparent and have been blatantly discriminatory against the poor.
Bank of Baroda recently announced that from November 1st, the bank’s saving account depositors can deposit and withdraw cash from branches only three times in month. Earlier Bank of Baroda was allowing five free cash transaction each – deposit and withdrawal – in a month. From 6th transaction onwards, bank is charging Rs 50 for every cash deposit and Rs 125 for every cash withdrawal done by saving account holders.
The reversal of decision by Bank of Baroda – third largest bank after SBI and HDFC with about 12 crore customers – does not change the fact that majority of banks are still allowing limited number of free cash deposits and withdrawals in a month. The largest bank of the country – State Bank of India, allows only 2 cash withdrawals and 3 cash deposits in a month and charges Rs 50 for depositing and withdrawing cash afterwards. Private banks like HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank are charging as high as Rs 150 per cash deposit and withdrawal beyond the allowed 3 to 5 free cash transactions in a month.
In the previous three years, banks have started restricting and put limit on the number of times account holders can go to bank branches to deposit or withdraw money from their own bank accounts. Apart from putting limit on the number of times customers can visit banks in a month, banks are also charging for providing other banking services – penalty for not maintaining prescribed minimum monthly average balance being the one which hurts the poor, working-class and the pensioners most, charges for using debit cards / ATMs / cash deposit machines, NEFT & RTGS charges, SMS charges, charges for changing the address, mobile number & other KYC related details, account closing charges, etc. – which are supposed to be provided by banks without any cost.
These service charges hit economically weaker sections disproportionately and eat up their small savings deposited with banks. Banks are allowing people with large sum of money in their bank accounts to have unlimited transactions without paying a penny but poor people with small savings, working class with bare minimum money for their monthly expenses and small businesses who transact more often than others are facing the brunt of these bank charges.
It is true that Banks are permitted by the Reserve Bank of India to levy the charges and fees for banking services as decided by board of the respective banks. But, this decision of RBI has acted as a tool in the hands of banks to extract money in form of services charges on banking services and common people are being forced to pay thousands of crores of rupees annually to banks just for being part of banking system.
The freehand given by RBI to decide upon the amount of service charges has proved to be a discriminatory, anti-people and financially exclusive policy against the people of this country. RBI does not have proper mechanisms to keep a check on these charges and has failed to protect the interest of the depositors. Many of the existing bank charges were introduced by banks at a time when non-performing assets of large corporate loans rose in the backdrop of AQR (Asset Quality Review) done by RBI in 2015. To recover the losses incurred from corporate bad loans, banks started collecting a large sum of money from depositors through bank charges and as a regulatory body responsible to protect the interest of the depositors, RBI failed to intervene and did not take actions against banks for this clear imposition of fee & charges to recover the losses due to corporate misdeeds.
Levying charges discriminatorily on the people with smaller savings clearly is targeted loot of public money and an act of shifting the burden of bank loss onto the people. What banks need to do is to strengthen their recovery policies and take strict actions against big companies and corporates who have not paid the loans. These multiple charges might seem a quick fix solution for the banks to cover their losses, but in the long run and especially during the current crisis this will only further loss of faith in public banks. When the shroud of privatization is looming over PSBs, they ought to earn the faith of the public and not dismiss their plight in the name of what they are ‘permitted to do’. Hence, irrespective of pandemic bank charges ought to be scrapped and not paused out of ‘benevolence’ after public outcry.
No Bank Charges campaign and its demands:
No Bank Charges is a campaign by Financial Accountability Network India (FAN India, https://www.fanindia.net/) to demand the removal of all bank charges for saving account holders. To protect the interests of the depositors and to promote financially inclusive policies Reserve Bank of India and Finance Ministry should make sure that bank customers are not charged for nominal banking services and should help banks in recovering large corporate bad loans.
FAN India is a collective of civil society organisations, unions, people’s movements and concerned citizens to raise the issues of accountability & transparency of national financial institutions and economic issues impacting peoples’ lives.
To demand the removal of bank charges, send emails directly to your banks, RBI Governor, and Finance Minister from https://www.fanindia.net/.