State-run banks charge their customers to cover costs for various services

There is a perception that private sector banks charge more for customer service than the state-run banks which has proved wrong.

Recently Reserve Bank of India (RBI) conducted a survey to the study the fees levied by the banks on their customers. According to the survey report for services such as mailing a cheque book, monthly accounts statement or collection of outstation cheques, most public sector banks are charging their customers more than their private sector counterparts.

An RBI official whose name has been kept anonymous told, “We carried out this exercise as customers complained that banks are going overboard with courier and postage charges”. “Our aim is to ensure that charges are reasonable and are decided by market forces and competition. For banks, interest should be the main source of income and not these service charges,’’ he added.

The report stated most of the public sector banks recover actual costs from their customers for delivery of cheque books and account statements at their homes and some banks for instance, Chennai-based Indian Bank has extra charges for sending a statement. Bank charges Rs23 to send a statement to its customers’ homes in addition to the actual postage. It even charges Rs12 for emailing a statement.

While leading private banks such as ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd and Kotak Mahindra Bank Ltd are providing such services free. Even Citibank NA, Hongkong and Shanghai Banking Corp. Ltd (HSBC) and Standard Chartered Bank do not charge a fee to send statements to customers’ homes.

The public sector banks such as State Bank of Bikaner and Jaipur, a State Bank of India associate levies a courier charge on customers on collection of outstation cheques. The public sector banks charging fees for the service also vary according to the denomination of cheques. On the other hand private banks have uniform charges irrespective of the value of a cheque.

Earlier, the central bank had prepared an internal report on “reasonableness of bank charges” in which it was stated that providing cheque books, pass books or bank statements, and automated teller machine (ATM) cards as basic services. The report said collection of local and outstation cheques must also be treated as a basic service, sending a signal to commercial banks on what it considered to be essential and low-cost services.

“The central bank is not here to prescribe any rates,” said the RBI official. “However, we will, at regular intervals, ensure that they are reasonable. We believe in moral persuasion. If banks don’t get the message, we could look at issuing a notification, like we did in the case of ATM services,” said the RBI official.

Recently the central bank instructed banks to limit charges for withdrawal of cash from the ATMs of other banks at Rs20 per transaction, from Rs55 earlier. The new rates came into effect from March onwards. RBI also suggested that cash withdrawals from any bank’s ATM should be made free from April 2009. The central bank made balance enquiries at all ATMs free in spite of the protest by some banks.