The Reserve Bank of India (RBI) deregulated the savings bank account interest rate with effect from October 25, 2011. It means that now every bank is free to fix the interest rate it wants to pay on savings account deposits. This step by the central bank has increased competition among banks and now depositors have the choice to figure out the highest fixed deposit rate and use the bank that offers it.
On the very first day, Yes Bank announced 6 per cent rate on savings accounts to attract retail customers. This was followed by Kotak Mahindra Bank, which is currently offering 6 per cent interest on deposits to its savings bank accountholders. Competition among banks has increased their interest outgo. The earlier decision of RBI, that interest would be computed on daily balance, has already increased their payout. To compensate for the losses on these fronts, banks have hiked various charges and introduced a few new charges as well, some of which you may not know about.
Charges on non-maintenance of balance
Banks charge penalty if an accountholder is not able to maintain a minimum average balance during a certain period. There are a few banks like ICICI Bank which compute average quarterly balance, while other banks like HDFC Bank take penalty on the basis of average monthly balance (AMB). In the case of ICICI bank, the minimum average quarterly balance for metro and urban area is Rs 10,000. For semi-urban area it is Rs 5,000, while for rural areas it is Rs 2,000. If one is not able to maintain this amount, ICICI Bank charges Rs 750 per quarter for non-maintenance of the minimum quarterly average balance. For regular savings account holders of HDFC Bank, the minimum balance (average monthly balance) is Rs 10,000 (metro/urban) and Rs 5,000 (semi-urban/rural). For urban/metro branches, if AMB in the account is between Rs 5,000 to Rs 10,000, Rs 250 per month is levied. If AMB is less than Rs 5,000, Rs 350 per month is levied. For semi urban/rural branches, if AMB in the account is between Rs 2,500 to Rs 5,000, the bank charges Rs 250 per month. If AMB is less than Rs 2,500, Rs 350 per month is levied.
Charges for issuance of statements and cheques
Those days are gone when issuing statements was considered as free service. For issuing duplicate/adhoc statements, HDFC Bank charges Rs 100, if it is done from branch and Rs 75, if it is done through phone banking (non-IVR). The bank charges Rs 50, if it is done through net banking, mobile banking or phone banking (IVR & ATM).
As far as cheque book issuance is concerned, with HDFC Bank, 25 cheque leaves are free per calendar quarter. An additional cheque book of 25 leaves will be charged at the rate of Rs 50 per cheque book. The charges in this regard don’t end here. Bank charges Rs 5 per leaf on non-maintenance of minimum balance. ICICI Bank charges nothing for 30 payable-at-par cheque leaves in a quarter. It charges Rs 30 for every additional cheque book of 15 leaves. It charges Rs 5 per cheque per leaf for all cheque books issued during the quarter in the event of non-maintenance of average quarterly balance (AQB). HDFC Bank charges Rs 400 per year for hold statement and Rs 100 for duplicate passbook issuance.
For State Bank of India, the minimum AQB in metro, urban and semi-urban branches is Rs 1,000 (for cheque operated accounts) and Rs 500 (for ordinary accounts). In rural branches of SBI, it is Rs 500 for cheque operated account and Rs 250 for ordinary account. If possible, one may move to such a bank, but it is not a permanent solution.
Charges for certificate and attestation
If one has an account with any bank, it is understood that one would have some amount as balance and there would be interest earning. But if an accountholder wants interest earning to be mentioned, he has to pay for it. Banks charge for balance certificate and interest certificate. Not only this, there are charges for photo attestation, signature attestation and address confirmation. Balance certificate for current year is free for savings account holders of HDFC Bank, but they are charged Rs 250 for the certificate of previous year. HDFC Bank is charging Rs 50 for interest certificate. For photo attestation, signature attestation and address confirmation, the account holders of HDFC Bank are charged Rs 100 per instance.
Charges for inoperative account and account closure
If you are an accountholder of HDFC Bank, be prepared to pay for a non-operational account of over a year. The bank will levy a charge of Rs 50 on inoperative account. This charge is applicable across savings and current accounts on a per quarter basis. The bank’s order has come into effect from January 1, 2012. If you want to close your account, it is better to do it late. If a savings accountholder of HDFC Bank closes his account between 15 days and 12 months, the bank charges Rs 500. Beyond 12 months, there is no charge for account closure.
The list is endless
Banks charge on a number of heads. You name it and there is a charge for it. Charges for issuance, re-issuance, cancellation, revalidation of cheques and demand drafts, charges on collection of outstation cheques, cheque returned, etc., are not unusual. But charges are also being levied by banks for any deliverable returned by courier due to negative reasons (e.g., no such consignee, consignee shifted and no such address). In addition, there are decline charges for insufficient balance when transactions are declined at other bank ATMs anywhere in the world or at a merchant outlet outside India due to insufficient funds.
There are charges for stop payment of cheques, TIN/IPIN regeneration (requests received at the branch for physical dispatch), etc. If the accountholder wants to know the cheque status, he has to pay for it. HDFC Bank, for instance, charges Rs 25 for it. For setting up standing instructions, one has to pay a fixed charge and then one has to pay for every such transaction. If one wants to know old records/copy of paid cheques, one has to pay for it.
Though there is no cash-handling fee for deposits of up to Rs 1 lakh in a day at the home branch for ‘non-managed customers’ of HDFC Bank, amounts above this level will attract a charge of Rs 25 per Rs 50,000 and part thereof for such clients. Non-managed customers are clients who do not have a private banking/wealth management account with the bank.
The solution
It seems banks are giving something with one hand while taking it back with another. Customers are paying for a number of services, often unknowingly. Then what is the way out? Such charges are on discretion of the respective bank. Adhil Shetty, CEO, Bankbazaar.com, says, “You may be charged for something in one bank and you may not be charged for the same in another bank. Smaller banks and PSU banks are better in this regard. Either they don’t charge on a few heads or charge less.”
As smaller banks have fewer accountholders, they don’t want to lose their customers by charging on various heads.
Many people have a number of savings accounts. Too many accounts become problematic for them. It is not easy to manage and maintain all of them. If financial planners are to be believed, having two accounts is enough. There is no need for four or five savings accounts. One should have minimum accounts possible. Shetty says, “One should enquire about the required minimum balance from his bank and try to maintain it. There are charges for almost everything. One cannot escape from these. One may save oneself by becoming vigilant and smart.”
