The decisions taken by the State Bank of India (SBI) to penalise its customers for not maintaining minimum balance in their savings accounts as well as to restrict its ATM facility (beyond a specified limit) for other banks’ customers are “missteps that could have been avoided”, an official of the Ministry of Finance has admitted. From 1 April, SBI, the country’s largest lender, proposes to charge for almost all services that banks usually provide to their customers. It justifies its proposed charges to cross-subsidise the cost for maintaining millions of Jan Dhan accounts that government-owned banks have opened to promote the government’s financial inclusion programme.

The government, however, feels that its push for greater digitisation of the economy is certainly not aimed at creating a revenue stream for banks. The official of the Ministry of Finance admitted that inculcating digital behaviour among its people does have a cost, but that should be set at a level which customers can happily endure. The banks, therefore, have been asked to reconsider its decision. Emboldened by the SBI’s move, many other banks are also gearing up for charging similar fees (to discourage cash transactions) that customers feel is not the right way to propagate the digital culture.

From 1 April, SBI, the country’s largest lender, proposes to charge for almost all services that banks usually provide to their customers. It justifies its proposed charges to cross-subsidise the cost for maintaining millions of Jan Dhan accounts that government-owned banks have opened to promote the government’s financial inclusion programme.
Apparently, banks are doing it to discourage cash transactions or to promote the government’s digitisation agenda, but they are also “looking at non-interest based revenue streams to boost their profitability”, said Amit Gupta, co-founder and CEO, TradingBells. The huge pile of non-performing loans (assets) in their books, topped by the lower demand for credit in the economy makes their search for operational profitability “a genuine one”, Gupta admitted. It is an accepted fact that carrying out transactions digitally does bring down operational cost for banks, helping them increase their profit margins.

Although the entire idea of charging customers for services a bank renders “is actually a step in the right direction, this could have been planned in a much better way”, Gupta said. SBI’s customers living in metro towns need to keep Rs 5,000 as the minimum balance in a month, failing which would invite a penalty of up to Rs 100 plus service tax.

Similar charges for rural, semi-urban and urban geographies have also been proposed. “What should be reconsidered is the quantum of the service charges that banks propose to inflict on their customers,” Gupta said.

Analysts also feel that the current charges for carrying out digital transactions (by debit or credit cards) should be rationalised to encourage more of these.

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