The Telegraph
Wednesday , April 2 , 2014
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Relief for customers

Mumbai, April 1: Banks have been directed not to levy penal charges on savings accounts where the customer is unable to maintain the minimum balance.

The Reserve Bank of India today suggested that the banks could instead restrict some of the services that were available to such accounts and restore them once the minimum balance rose to the desired level.

Consumer protection is a key element of financial inclusion, which is one of the five pillars unveiled by Raghuram Rajan after he took over as governor in September to guide its developmental and regulatory measures.

“Banks should not take undue advantage of customer difficulty or inattention,” Rajan said.

The RBI also said banks should not levy penal charges for non-maintenance of minimum balances in any inoperative account.

At present, the minimum balance requirement in a savings account and the charges for non-maintenance vary across the sector. For instance in Bank of Baroda, the charges for not maintaining minimum balance varies from Rs 100 to Rs 750 per quarter with the penalty being the highest for those accounts where more facilities are offered to the depositor.

In HDFC Bank, the charge goes up to Rs 350 per month (urban/metro areas) if the individual is unable to maintain the average monthly balance in regular savings account.

While the RBI directions should come as a relief to customers, banks were not too happy with the idea. A senior banker, who did not wish to be identified, said the minimum balance requirement was one of the charges that the bank levied in view of the various services offered to the depositor.

Senior bankers said they would have to decide on how to implement the RBI diktat.

Apart from asking banks not to levy such a penalty, the RBI said banks should also consider allowing their borrowers the possibility of pre-paying floating rate term loans without any penalty. At present, banks cannot levy pre-payment penalties on floating rate home loans.