HC moved to curb ‘loot’ by banks under garb of service charges

HC moved to curb ‘loot’ by banks under garb of service charges


A whopping Rs 4,989.55 crore was collected by banks for failure of customers to maintain minimum balance in 2017-18. Of this the share of public sector banks had a share of nearly Rs 3,551 crore with State Bank Of India atop with 2,483.87 crore. And in four years the public sector banks earned a massive amount of over Rs 11,500 crore.

Besides are the amounts raised by limiting ATM transactions, all when financial inclusion is the buzzword for the Government, says sociocultural activist and member of the central executive committee of Indian Forthright Movement PG Sunilkumar of Koothattukulam in Ernakulam district. Sunilkumar told Pennews that he has moved Kerala High Court against this 'loot’.

Banks were levying varying charges in an opaque manner for services offered. The practice of Indian Banks Association (IBA) fixing the benchmark service charges had been done away with, leaving individual banks to decide the fee. This, he said, was on the basis of a Reserve Bank of India (RBI) circular issued on July 1, 2014.

Customers complained that in certain instances if on some days in a month the amount fell short of the prescribed minimum balance by a few rupees, banks should charge an amount proportional to the shortfall instead of the full amount, Sunilkumar said.

Charge on ATM transactions was another method to fleece customers, he adds.

Most of the banks provide three free ATM transactions per month in metro cities and five in rural areas. But, these include financial and non-financial ones. The latter cover balance enquiry, ATM pin change, mini statement and booking a fixed deposit. Cash payment, cash withdrawal and the like come under financial transactions. For every transaction beyond the minimum ones, banks charge a nominal fee and the amount is fixed by individual banks, subject to a maximum of Rs 20 per transaction. Such irregularities and unreasonable levying of transaction charges for using ATM by the customers had to be done away with.

Sunilkumar had taken up the issue with the central bank and was told that the right to determine service charges had been vested with individual banks since July 2014.

Not to be cowed down, he made representations to the Prime Minister, the Finance Minister and several MPs. But with no response coming from any quarter, he finally moved the High Court.

According to the petition, the RBI circular says that while fixing service charges for various types of services like cheque collection, ATM usage, etc, banks should ensure that the charges are reasonable and not out of line with the average cost of providing these services. Bank should also take care to ensure that customers with low volume of activities are not penalised.

Arrangements should be made to work out charges with prior approval of their boards of directors.

RBI had earlier asked banks to send mandatory SMS alerts for transaction made via debit cards, ATM cash withdrawals, NEFT and RTGS transactions after the funds were credited and were nonchargeable.

It directed banks to collaborate with telecom providers and send SMS alerts for transactions based on actual usage charges.

A study conducted by an independent banking sector watchdog showed that at least 22/48 banks charged a fixed amount per month or quarter for SMS alerts.

The petitioner points to instances when there are no sufficient funds in the account and by mistake an amount to be withdrawn from an ATM is not available in his account, the first free transaction with a message of insufficient funds is over. The customer then checks the balance which is the second transaction and finally he withdraws the amount, his monthly quota of free transactions is over.

Worse still is when the customer does not get money due to non-availability of cash in the ATM. He has to pay service charge as the machine has read his card. There were several such instances of the customer getting duped.

The petitioner has sought issuing a writ of mandamus or any other appropriate direction to the RBI to ask banks to frame transparent and reasonable service charges and make them public in a month. This would be of much benefit to the public at large as banking transactions were not only becoming popular, but also promoted by the Government.