The outbreak of the coronavirus pandemic, which is yet to end, forced the banking institutions to improve their capabilities on the technology front without wasting time. In pre-Covid times, banking operations observed a sea change and integration of technology into the core banking operations helped the banks to provide a series of technology driven services to their customers, anywhere and anytime. However, despite facilities of online transaction platforms in place, the banks were not active enough to guide their customers to board the online platform for conducting digital transactions.
Even as demonetization of high value notes of Rs.500 and Rs.1000 in November 2016 provided a push to the digital transactions, it was the Covid-19 induced pandemic which promoted the online transactions to unimaginable heights just within a span of two years. In order to meet the growing expectations of their customers, the banks have been making huge investments in upgrading their technology platform and the situation has created a pivotal role for Fintech companies to lend technology support to the banks and financial institutions. However, the good thing is that customers are gladly taking the route of digital facilities without any fear to conduct various day to day financial transactions.
Precisely, the pandemic, on the opportunities side, has been leading to mass migration of people to digital transactions and today we witness huge utilization of services like internet banking, mobile banking, swift transfer of funds anywhere in the world, credit cards, debit cards etc. on large scale. As banks are continuously engaged either in upgrading or adopting new technology solutions for the convenience of their customers, the service charges or transaction fees are unavoidable and to be paid by the customers.
One main thing needs to be clear to all that digital services are not free and customers have to pay for availing these online services after breaching a threshold limit of free transactions. Of course, such charges/fees have to be reasonable in line with the facilities a bank customer is availing. It is also a fact that for quite some time now, bank customers have been vomiting anger on social media against such service charges/ transaction fees.
So, here it makes sense to make you aware about some bank charges that all of you should know about. Notably, in line with the Reserve Bank of India (RBI) directions, all banks have kept their service charges schedule available for the general public on their websites.
What is meant by maintaining average monthly or quarterly balance?
In the modern banking practices, maintaining average monthly or quarterly balance (AMB/AQB) in saving deposit accounts is a norm. This minimum balance criterion is an amount which an account holder is supposed to keep in the account on a regular basis. Actually, banks incur cost for maintaining and servicing the deposit accounts, especially savings accounts. These charges are to be recovered, and applying ‘average minimum balance requirement’ norm to the savings accounts is a smart move by the banks to recover such maintenance charges.
Globally, it is one of the most widely applied norms to generate revenue by any bank. An accountholder shouldn’t get surprised if he/she finds his/her savings account closed if AMB or AQB is not maintained over a period of time. The balance in the account would be eaten up through regular penalties. Some banks don't close the account, but create a negative balance in the savings account by levying charges for non maintenance of minimum balance.
Notably, in the AQB mechanism, an account holder has an opportunity to cover AQB despite being on the borderline of the breach. Their balance may be swinging on and off below minimum balance requirement during the month but at the end they can manage AQB requirement. Under AMB criterion, there is no chance of swinging of balance on and off below the minimum balance norm. There are banks who now stick to AMB to get more and more customers into the penalty net on account of non maintenance of average balance.
Pertinently, the concept of average minimum balance requirement has the Reserve Bank of India backing. The RBI has advised the banks to inform customers regarding the requirement of minimum balance at the time of opening the account in a transparent manner. The apex bank had even directed the banks to intimate the account holders about any subsequent changes in this regard.
So, account holders need to understand that breaching the average minimum balance requirement would cost them. So, what is the hitch in falling in line and save money?
What are other services for which banks levy charges?
As already stated that you are required to maintain average balance in your account. Otherwise, the bank would be deducting charges from your account as a penalty for breaching the threshold limit of average balance. In addition to this, you shouldn’t be surprised if your bank charges you for cash transactions. There are banks who would charge you for making unlimited cash deposits or even withdrawals. Besides, there is also a fee charged to a bank customer, if he/she conducts transactions at home as well as non - home (other banks') ATMs beyond the threshold limit of such transactions per month.
Banks also charge you for dishonoured cheques. If a cheque which is drawn on bank or deposited with bank is returned for want of funds or any other valid reason, the bank would be deducting charges for the 'dishonoured cheque'. The charges differ from bank to bank.
In today's digital age, it makes sense to make best use of online transaction facilities. Avoid writing a cheque as much as possible. You may get some cheque leaves free of cost, but after crossing the threshold limit you will have to pay for each cheque leave.
You must also remember that your debit card is not free from charges. These charges, which are annual or biannual in nature, are deducted immediately after the card is issued. If the card is lost or damaged, you will have to pay additional charges for the new one.
Obtaining a duplicate account statement also attracts charges. Here you have a choice to cut down these kinds of charges. Take route of digital services to obtain your duplicate account statement. The banks will give you a 50% or above rebate on such charges.
Using electronic modes of funds transfer like National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) too attracts charges. International transactions cost a few percent more because of the currency conversion charge. If you make payments abroad through debit or credit card, a charge of varying from bank to bank is added to the exchange rate
Swiping a debit or credit card at a petrol pump attracts the amount of surcharge. The charges vary from bank to bank. However, some banks offer you a cash-back in partnership with oil marketing companies.
SMS alert service is one of the best things that has happened entirely to the benefit of the account holder. Now banks charge for the balance updates they send on cell phones. Some banks charge on a quarter basis for the service, while some levy charges after the account holder crosses the threshold limit of free SMS alerts.
Even charges are levied if you leave your account unused. Over a period of time, these unused accounts fall below the minimum amount balance limit. Once it happens, the bank starts deducting charges. At one point of time, the entire balance of your account can be wiped out. So don't leave your account inactive and simultaneously ensure your minimum balance in the account is in line with the norms to avoid charges' deduction. It is better to close the unused accounts.
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.