Don't allow banks to fleece customers

In what many see as anti-customer step, three major private banks in the country — HDFC Bank, ICICI Bank and Axis Bank – are charging their customers a high transaction fee for cash deposits and withdrawals at their branches from March 1. The rates vary from bank to bank but every cash transaction after the first four in a month will carry a minimum Rs 150 levy on customers. The country’s biggest bank, State Bank of India, has also announced that it would charge Rs 50 for each cash transaction beyond three transactions in a month. The minimum balance in all types of accounts has also been raised by the bank. The restrictive rules apply to zero balance and salary accounts too. This is nothing but rip off of customers and arbitrary decision on the part of the banks. The fee is a high amount by the standards of income and spending of ordinary customers. The restrictive rules apply to zero balance and salary accounts too. The banks claim that only bank transactions would invite the new levies and ATM withdrawals would be exempt. But the greater part of the country’s financial transactions are through banks and not through ATMs which are concentrated in cities. In any case, there are some existing restrictions on ATM withdrawals too.

Banks say the new regulations are meant to promote digital payments and electronic transfer of money and to discourage cash transactions, which is the government’s new policy. Digital transactions need to be encouraged but not with disincentives and punishments. Cash still rules the world of finance in the country and changes in habits and practices cannot be brought about through fiat. Most people who have bank accounts are unable to plan their expenditure in such a way as to restrict withdrawals to three to four times a month. The restrictions are likely to be counter-productive. Many people may keep cash instead of depositing it in banks. This can hurt the banks. The increasingly usurious policies of banks will lead to loss of trust and confidence of the people in the banking system. The impression will also gain ground that only big customers and transactions are favoured by the banks. This goes against the idea of financial inclusion which is important for development.
The new levies will not only inconvenience individual customers but also hurt small and medium business enterprises and the unorganised sector, including farming, where there is wide use of cash. They can also adversely impact economic growth. More banks may follow the lead given by the major banks in the next few days. The Reserve Bank of India (RBI) and the government should immediately intervene and ensure that customers are not fleeced by the banks.