Mumbai, April 24: The Reserve Bank has asked banks to desist from levying high service charges and exorbitant interest rates. The RBI said bank ombudsman offices have received several complaints of excessively high interest rates and fat processing fees on loans and advances.

“Although interest rates have been deregulated, rates of interest beyond a certain level may be seen to be usurious and can neither be sustained nor are in conformity with the normal banking prudence,” the central bank said in its annual policy statement. It has advised bank boards to frame internal principles and procedures to keep a check on such practices.

Customers have complained about a leading private bank increasing its fees for services such as cash withdrawals from ATMs. The bank is also allegedly deducting a sum from a customer’s account if the minimum quarterly balance falls below a level.

The RBI also sensitised banks on the need to offer quality services.

“Within the domain of necessary freedom to banks to choose the types of services to be offered to the customers and related cost, banks are encouraged to set for themselves a quantifiable benchmark for the quality of services,” the central bank said.

The RBI has been taking many initiatives to address customer grievances. The Banking Ombudsman Scheme is being amended to make it more customer friendly.