Banks raise Rs2,320 cr as fine on low balance accounts in Apr-November
02 January 2018
Between April and November 2017 banks in India have collected about Rs2,320 crore from customers who failed to keep stipulated minimum balance in their accounts.
State Bank of India (SBI), the country's largest lender alone accounted for Rs1,771 crore of this heist. This is more than the SBI's net profit for the July-September 2017-18 quarter.
During April-November Punjab National Bank (PNB) collected Rs97.34 crore while Central Bank of India collected Rs68.67 crore and Canara Bank raised Rs62.16 crore in penalties from customers who failed to keep stipulated minimum balance in their accounts.
With 420 million accounts, including 130 million basic savings accounts and JanDhan accounts, the minimum balance fee is a big boost to NPA-laden SBI's revenue.
Most banks have fixed penal charges for non-maintenance of minimum balance in savings bank accounts at an average rate of 6.5 per cent of every month's shortfall, which is equivalent to a penal rate of 78 per cent per annum, according to a study, 'Fault lines in Implementation of Minimum Balance Rule', by Ashish Das, Professor, Department of Mathematics, IIT Bombay.
''This high rate of penalty appears to have no correlation with the costs for arranging such funds at, say, the call money market rate,'' said Das.
''Thus it raises question of efficacy of regulation B (whereby it should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services) of the RBI's guidelines on levy of charges for non-maintenance of minimum balance in savings bank account,'' he said.
The study notes that banks have set multiple slabs of shortfalls while the charges are not set as a fixed percentage of the shortfall.
The charges may be reasonable in absolute terms but not in relative terms, given that the RBI has defined what, in relative terms, is reasonable, the study pointed out.
''One could have cared less if the banks' approach had not been on penalising more, in percentage terms, the accounts with smaller shortfalls than the ones with larger shortfalls, thereby leading to accounts with smaller shortfalls cross-subsidising the accounts having larger shortfalls,'' said Das.
According to the study banks' mimimum balance rules are in contravention of the 'rule of unbiasedness' set by the RBI as it impose a disproportionately high penal charge in the lower slab of shortfalls than in the higher slab of shortfalls. In this process, the banks unduly discriminate by cross-subsidising depositors for no fault of a vast section of customers.