Non-maintenance of minimum balance should not be charged, says RBI

ATM charges to be renewed as well

The Reserve Bank of India (RBI) on Friday asked banks to discontinue the practice of levying penalty on non-maintenance of minim balance in ordinary savings bank account, a move that may hit the fee-based income of banks.

“Banks may discontinue the practice of levying penalty for non-maintenance of minimum balance in ordinary savings bank accounts and instead consider converting such accounts to Basic Savings Bank Deposit accounts,” said RBI in the Annual Report of the Banking Ombudsman Scheme for 2012-2013.

Among the other action points for improving customer protection are: banks and Indian Banks’ Association (IBA) will revisit the ‘reasonableness’ of the proposed levy of charge for transactions done by customers at banks’ own ATMs. This comes at a time when banks, particularly public sector banks, were contemplating an increase in ATM transactions charges.  Notably, on Thursday, RBI deputy governor K C Chakrabarty had said at an event in Mumbai that it would be "ridiculous" for a bank to charge its own customers for ATM services.

At present, there is no cap on free transactions at own-bank ATMs, while customers can use other banks’ machines up to five times a month without any extra cost.

RBI has also asked IBA to issue instructions at the earliest to banks to discontinue levy of pre-payment penalty on all floating rate loans and ensure that fixed rate loans are truly fixed and are not referenced to any floating rate benchmark.

Besides, banks have been asked to revisit the charges levied to ensure reasonableness, fairness and transparency in pricing. According to RBI, IBA will issue detailed operational guidelines to banks in this regard.

RBI said banks and IBA will formulate a policy on zero liability of customers in electronic banking transactions, where the bank is unable to establish customer-level negligence. “The onus of proving customer-level negligence would be on the bank and when such negligence is not established beyond doubt, the benefit of such doubt may be given to the customer. IBA and banks should strive to put in place policies, systems and processes to secure electronic banking systems, protect customer’s interest to bring it ‘on a par’ with traditional delivery channels,” RBI said.

RBI also asked banks and the IBA to work together to roll out a media campaign to create awareness about products and banks’ commitment to Fair Practices Codes.

“The Depositor Education and Awareness Fund and banks’ own advertisement budget may be used for the purpose,” said RBI.