Report of the Working Group to formulate a scheme for ensuring reasonableness of bank charges - ஆர்பிஐ - Reserve Bank of India
Report of the Working Group to formulate a scheme for ensuring reasonableness of bank charges
RBI/2006-2007/245
DBOD.No.Dir.BC. 56 /13.03.00/2006-2007
February 2, 2007
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir,
Report of the Working Group to formulate a scheme for ensuring
reasonableness of bank charges
As banks may be aware, as announced in the Annual Policy Statement for the year 2006-2007, in order to ensure fair practices in banking services, Reserve Bank of India had constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges and to incorporate the same in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). The Working Group has since submitted its report and the same has been placed on our website (www.rbi.org.in). The recommendations of the Working Group have been examined and accepted by Reserve Bank of India with certain modifications.
2. Action required to be taken by banks is indicated under the column ‘action points for banks’ in the Annex to this circular.
Yours faithfully,
(P.Vijaya Bhaskar)
Chief General Manager
Recommendations of the Working Group to formulate a scheme for ensuring reasonableness of bank charges
Sl. No. |
Recommendations of the Working Group |
Action points for banks |
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1 |
Identification of basic banking services Banks have to follow two broad parameters for identifying the basic banking services: (A) Nature of transactions
(B) Value of transactions Low value of transactions with customers/public up to the ceiling as given below will the second parameter:
(Foreign exchange transactions valued up to $ 500/-) Based on the two parameters, the Working Group recommends enumeration of the following as the basic banking services:
The above list is compiled only as a guide and the list may not be treated as exhaustive. Banks, may at their discretion, include within the category of basic services such additional services as they consider appropriate. |
Banks are advised to identify the basic banking services on the basis of broad parameters indicated by the Working Group. The list of services identified by the Working Group is only an indicative one and banks may, at their discretion, include within the category of basic services such additional services as they may consider appropriate. .
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2 |
Offering basic banking services outside the scope of bundled products Some of the banks do not levy charges on each individual product or service. Products and services are bundled and offered to a customer as a composite offering. The bank recovers the cost of these operations through net interest income. The bank achieves break-even levels through higher average balances in customer accounts which yield healthy interest margins or by imposing charges for keeping inadequate balances. In so far as the basic services are concerned, the banks’ objective should be to ensure that these are made available to the users at reasonable prices/charges and towards this, the basic services should be delivered outside the scope of the bundled products. |
Banks may implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and towards this, delivering the basic services outside the scope of the bundled products. |
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3 |
Principles for ensuring reasonableness in fixing and communicating the service charges
Banks will without fail inform the customers in all cases when a transaction initiated by the bank itself results in or is likely to lead to a shortfall in the minimum balance required to be maintained. |
The principles for ensuring reasonableness in fixing and communicating the service charges, as enunciated by the Working Group, may be adopted/ followed by banks. |
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4 |
Disclosure and notification of service charges It is imperative that the customers are made aware of the service charges upfront and the changes in services charges are implemented only with prior notice to the customers. For changes made in the charges, the notice to customers need not necessarily be to each individual customer, as it would be costly and impractical. The Working Group finds that for proper disclosure, the banks would do well to fully recognize the following needs of the customers and take steps to ensure that these are met:
(B) Notifying the changes effected in the charges
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Banks may take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with the prior notice to the customers.
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5 |
Other recommendations
Deficient grievance redressal in the banks, including a process of prolonged correspondence, always leads to complaints being escalated to the Banking Ombudsman/Reserve Bank of India. Banks are therefore required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. (ii) Financial Education The Working Group recommends that full-fledged information on bank products and their implications are to be disclosed to the customers so that the customers can make an informed judgment about their choice of products. |
The recommendations of the Working Group relating to redressal of grievances and financial education, as brought out in column 2, may be implemented by banks. |