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Loot of people’s money by banks? RBI "fails" to issue guidelines on charges

Counterview Desk
The Financial Accountability Network (FAN), a collective of civil society organisations, unions, people's movements and concerned citizens to raise the issues of accountability and transparency of the national financial institutions, has said that India's banks should "stop imposing bank charges on poor for flourishing the rich in India".
Pointing out that during April 2014-September 2018, the money earned as penalty by the 21 public sector and three private sector banks amounts to Rs 12,388.56 crore, a FAN note insists, "It is unfortunate that despite mounting evidence that bank charges are burdening the people, Reserve Bank of India (RBI) has not yet issued any guideline on the service charges that are currently being levied by the banks for the savings account holders."

Text of the FAN note:

The recently released Reserve Bank of India’s (RBI) annual Banking Ombudsman Report for the year 2017-18 mentions a pilot study in Mumbai on the service charges levied by the banks for basic banking services. The study was commissioned to ascertain customer feedback and the need for rationalisation of charges.
The study reveals that over 30 per cent of the customers were unaware of the service charges and 25 per cent expressed their discontent on penalties such as the one levied for not maintaining the minimum balance. The report further states that last year, “Complaints on ‘Levy of Charges without prior notice’ constituted 5 per cent of the total complaints, but on a year-on-year basis it witnessed an increase of 13 per cent.”
It is unfortunate that despite mounting evidence that the bank charges are burdening the people, RBI has not yet issued any guideline on the service charges that are currently being levied by the banks for the savings account holders. As the primary regulator of commercial banks, the RBI cannot remain silent when the charges are over-burdening the people.
In FY 2017-18, 21 public sector banks collected Rs 3490.49 crores just for the non-maintenance of the minimum balance! During April 2014-September 2018, the money earned as penalty by the 21 public sector and three private sector banks (Axis, HDFC and ICICI) amounts to Rs 12,388.56 crore.
It is important to highlight that the penalty for not maintaining minimum balance is only one of the various charges imposed by the banks for the basic banking services.

These service charges include: 

  • Cash deposits and withdrawals at bank branches; 
  • cash deposits in accounts other than one’s own; 
  • cash withdrawal from ATMs; 
  • issuance fee on debit cards; annual charge on debit cards; 
  • balance inquiry at ATMs; mini-statements from ATMs; 
  • regeneration of ATM pin code from branch; account closing charges; 
  • transaction declined with debit cards due to insufficient funds; 
  • SMS alerts that a customer gets from banks; change in address; 
  • change in mobile number; changes in KYC related documents; 
  • cash deposits at CDMs (Cash Deposit Machines); 
  • change of soiled/mutilated/old currency notes; NEFT and RTGS transfer of funds; 
  • surcharges on uses of debit cards for rail tickets, petrol/fuel/ gas stations and payment of certain bills and government services; 
  • cheque books; 
  • demand draft; 
  • balance certificate; 
  • and signature verification. 
The cumulative amount from the services mentioned above from all the banks will be much higher. In response to the Right to Information query, the Bank of Baroda recently revealed that from FY 2014-15 to FY 2017-18, it earned Rs 499.21 crore just on the ATM and SMS charges.
While, in the last few years, on the one hand, in the name of financial inclusion, the government is forcing previously unbanked people to be a part of the banking system. On the other, to show their balance sheet, in the wake of gigantic Non-performing Assets (NPAs) accumulated by the banks, in the favourable light, the banks are inventing new ways to maximise profit.
All this exist along with various types of premier bank accounts, in which one can get an exemption from the charges mentioned above if the person maintains a higher balance in the account.
The consequence of this unfair policy is that the people who receive government subsidies, pensions or any welfare scheme of the government are those who are also forced to pay higher fines and charges! It is not just shameful but brutal that the banks are trying to compensate their losses created due to the reckless lending to the filthy rich by draining the blood and sweat of the poor in the name of service charges.
Our ongoing campaign against bank charges has brought to fore the loot of people’s money by banks. Students, labourers, hawkers, farmers, shopkeepers, homemakers, unemployed youth, urban poor, and pensioners from across the country have shared their stories of losing money to the bank.
Many of the people whom we met during the campaign narrated how they lost their Mahatma Gandhi National Rural Employee Guarantee Act (MGNREGA) wages, scholarships, pensions, because of various bank charges.
Rehan Tirmizi, a student at the Jamia Millia Islamia, New Delhi, narrated to us how the penalty levied by the HDFC Bank due to the non-maintenance of the minimum balance has pushed his account balance to minus Rs 4,000. Shanti Devi, a daily wage labourer from Muzaffarpur, Bihar, told us how Rs 500 she earned from MGNREGA work was reduced to only Rs 60 due to this policy.

We demand:

  • Immediately remove all bank charges on the savings bank account
  • Stop fleecing the poor to compensate for the loss by the Rich
  • Make willful default a criminal offence
  • Implement stringent recovery mechanisms for NPAs of large corporate loans
  • Ensure proper due-diligence in lending to big businesses

Solidarity statements:

  • The Burden of the NPA created by the rich has fallen on the marginalised sections: Dr Syeda Hameed, former member, Planning Commission of India
  • It has come to light that the banks, in the name of providing various banking services, are illegally and unnecessarily charging the common citizens. This is loot as it comes at the cost of the customers who can't maintain a certain balance in the account: Medha Patkar, leader, National Alliance for Peoples’ Movement
  • The policy of bank charges must be reviewed immediately. If banks can have charges for the minimum balance, what prevents them from introducing one for the high-net-worth individuals, who have multiple and more complex relationships with the banks?: Thomas Franco, former general secretary, All India Bank Officers Association
  • National Hawkers Federation protests this policy of bank charges in strongest terms. The hawkers, street vendors, and other urban poor and are the worst affected: Shaktiman Ghosh, general secretary, National Hawkers Federation
  • The bank charges as unacceptable and that it must go: Vijoo Krishnan, Central Committee Member of CPI-M, and Joint Secretary of the All India Kisan Sabha
  • The poor and middle-class like small traders, labourers etc., who have been included in the banking system by force, have to pay the charges. This is unjust: Harsh Mander, Centre for Equity Studies and Aman Biradiri
  • This ongoing loot in the name of bank charges has to be stopped. The solution to the present crisis in the banking sector is to have stronger public sector banks working without any political interference to protect the interests of the people: Amitabh Behar, Chief Executive Officer, Oxfam India
  • Ambani and Adanis do not have a minimum balance in their bank accounts, poor; student; farmers; women etc. does! So people, who are already poor, are being fleeced. This is immoral and fraud. We demand that the bank charges be scrapped so that we can stop the poor becoming poorer: Shabnam Hashmi, Social Activist, Anhad
  • The rule on the maintenance of minimum balance is bizarre because everyone would like to have a high bank balance. Those who can't maintain minimum balance are the ones who do not have any money. Bank charges are a tax on poverty. We must make this system of hidden charges more transparent and all the unjust charges must be scrapped: Shehla Rashid, leader, Jammu and Kashmir Peoples' Movement
  • In the name of achchhe din, bure din has arrived in India. One can understand this by the fact that it is now a crime to be poor and it is fined: Umar Khalid, United Against Hate

Comments

SAMIR SARDANA said…
AN RBI WHICH HIDES THE NAMES OF NPA AND FRAUDS,WILL DO ALL IT CAN TO PROTECT BANK BOTTOM LINES BY DELAYING CLARIFICATIONS ON BANK CHARGES ON INDIVIDUALS !

THE MAXIM IS LOOT THE HOI POLLOI AND LINE THE POCKETS OF THE ELITE !

Y IS THE RBI PROTECTING THE NAMES OF THE NPA AND FRAUDS ? dindooohindoo

- The Criminal action and Fraud by the RBI and the Banks is manifest in the secrecy of BANK Borrower fraud data (by a conspiracy of silence and obduracy of refusal),to provide a perfidious window of theft,to the said entities to raise credit from the unorganised sector,retail,Chit funds/ Nidhis/Societies - using a chain of brokers and front companies,to spread the virus of the credit default menace, across the nation in terms of geography, sector and most importantly, the ignorant classes and masses.This credit is at a high cost and will bankrupt the said entity and lead to massive financial fraud by the said entity and huge losses to the unorganised lenders and ignorant creditors.This is a form of fraudulent misallocation of capital to unviable and non-economic purposes by the fraudulent actions of the Banks,REC and the state.This is neither in public or national interest

- Equity and other investors have a right to obtain BANK Fraud/NPA data for units, sectors, geographies, clusters and supply chain networks,as these pose an existential risk to the viability and business models of several entities.Hence the NPA data is sought in public interest

- Disclosure of BANK/NPA and Corporate Fraud is also in public interest,as it might place the supply chain of Performing Assets at severe operational and credit risk,as a 5-10% credit default of 1 supplier in the supply chain of a Performing Asset (who is also a supplier to a BANK Fraud afflicted entity) can disrupt and destroy the entire supply chain and PPC of a Performing Asset.

- Besides a BANK NPA or Corporate Fraud afflicted entity being a loss and destruction of an economic asset, it is also a huge loss to society and the welfare state,as the said entity is unable and unwilling to focus on R&D,Branding, Innovation,New Product Development etc.,and has no option but to default on regulatory compliances (such as pollution ,effluents, waste disposal, disposal of hazardous materials,worker safety,use of dangerous, unstable and hazardous materials etc.) - as it has a 18-24% margin disadvantage, just in terms of financing charges.This makes it critical to ensure that the information on BANK Fraud Borrowers is in the public domain and such a treatment is in public interest.

- The argument that FINANCIAL INSTITUTIONs are allowing such assets to linger,as it is a form of mothballing or extinguishing surplus manufacturing capacity,is an act of unmitigated criminality - which makes it imperative that the borrower fraud data should be in the public domain

- If fair arm length creditors refuse to finance BANK fraud/NPA assets,or are not hoodwinked into funding such assets, the economic capacity of the said asset will get a serious financial investor who is not motivated by fraud and theft - and this makes it imperative that the BANK borrower fraud data should be in the public domain

- If a NPA is induced by state action such as PPA/Environmental issues for Power Plants or delayed land acquisitions or arbitration cases – then all this will be disclosed in the media and the directors and auditors reports, and so ,what is problem in disclosing this information.Should this information not be in the public domain to caution non bank creditors ,small suppliers and employees ? Is that not in Public Interest ?

- If an NPA is induced by management incompetence and fraud,should this information not be in the public domain to caution non bank creditors ,small suppliers and employees ? Is that not in Public Interest ?

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