RBI panel wants banks to peg user charges lower

16 September 2006

Mumbai: A working group set up by the Reserve Bank of India (RBI) has suggested lowering or scrapping outright the several service charges on individual customers for using banking services. The panel on reasonable bank charges has suggested fixing service charges on an ad valorem basis, subject to a ceiling.

In fact, the working group has suggested cross-subsidies to individual customers and transfer of unrecovered costs to corporates. The charges should be transparent and made known to all depositors at least a month in advance, the panel said.

While banks' service charges are not based on actual costs of providing the service, the panel said there cannot be any reasonableness in the various levies. Most banks are also unsure of the real cost of the services they offer, the panel headed by N Sadasivan, banking ombudsman for Maharashtra and Goa pointed out.

The working group, which listed several instances where customers are forced to pay for unsolicited services and erroneous transactions, has suggested a review of the service charges by the RBI.

The panel has listed 27 services related to deposit accounts, loan accounts, remittance facilities and cheque collection as basic banking services and suggested low or nil charges on low-value transactions like cheque collection and remittance of up to Rs 10,000 and forex transactions up to $500.