Banks imposing unreasonable fee for breach of minimum balance: IIT prof

The public sector, as well as private banks, have been imposing unreasonable charges on customers for failing to maintain minimum balances in their savings accounts, a study by an IIT-Mumbai professor has claimed.

The study, by Ashish Das, showed that some banks like Yes Bank and Indian Overseas Bank have been imposing penal charges of over 100 per cent per annum on the shortfall in maintenance of minimum balance in customers accounts.

The Reserve Bank guidelines mandate that charges for non-maintenance of minimum balance in savings bank accounts be "reasonable and not out of line with the average cost of providing the services".

According to the study: "With many banks charging at an average high rate of 78 per cent per annum of the shortfall amount, it makes the whole regulation of reasonableness of charges as per cost quite shallow".

As per the data provided by Das, Indian Overseas Bank imposes an annual charge of 159.48 per cent on shortfall in minimum balance. Yes Bank charges 112.8 per cent, followed by HDFC Bank (83.76 per cent) and Axis Bank (82.2 per cent).

The largest lender SBI charges 24.96 per cent penalty, says the study.

The minimum balance requirement in different banks ranges from Rs 2,500 to Rs 1 lakh.

The RBI, the study said has formulated the penal charges rule with an objective of bringing in fairness from the customers' angle.

"Thus, it is time to plug the regulatory and supervisory gaps in a holistic manner and formulate clear guidelines on the formation of slabs and how to measure the reasonableness of charges based on costs of funds," it said.

Ashish Das is a professor of statistics with the Indian Institute of Technology Bombay, Mumbai.