Banks Slap Service Charge On Us-64 Payouts

Commercial banks have slapped a service charge for crediting the dividend warrants of US- 64 into the bank account of the unitholder through the electronic clearing system (ECS) set up by the Reserve Bank of India (RBI).

The RBI has been trying to push through the ECS for faster and cost efficient clearing of cheques and the move to levy a service charge will come as a set back to the scheme.

The charge was levied as per the Indian Bank Association's (IBA) circular and has attracted the ire of the All India Bank Depositors Association (AIDBA).

Banks are charging five rupees on each dividend warrant of US-64 irrespective of the dividend amount to the unit-holders. The issue is being hotly disputed by the All-India Bank Depositors Association, which has quoted the latest advertisement of UTI, "dividends sent at no extra costs to the unit holders" to seek a revoking of the collection of the service charges.

Surprisingly, UTI has taken an ambiguous stand and is unwilling to ensure that the prevailing charge is waived.

The service charge appears intriguing especially at a time when ECS put in place by RBI should bring down transaction costs across the board.

Even according to prevailing banking practice, banks do not levy service charge for warrants deposited for collection unless it has received a specific mandate for the same from the account holder. Moreover, the charges were being paid by UTI so far.

UTI in a written reply to the AIDBA's query has said, "banks are levying service charges to their account holders in terms of the recent IBA circular.

There is no question of UTI bearing any service charge levied by various banks for the services rendered to their account holders".

M R Pai, president, Forum of Free Enterprise, Mumbai, is attempting to organise the unit holders of UTI against this surcharge.

Says Pai, "the scope of misuse with the practice of charging service charges is evident as attempts are being made to institutionalise it, forcing unit holders to shell out charges which at times are not even off-set by actual gains."

However, M P Sethia, deputy general manager of UTI, is backtracking from the earlier stand and sending out conflicting signals.

Says Sethia, "dividend warrants are being sent to the bank on the request of the account holders only after a mandate to the Unit Trust to credit this amount to their account. This means that the account holder is indirectly requesting the bank to collect the dividend on their behalf and to credit the same to their account."

According to S Divakara, secretary, Forum of Free Enterprise, "this appears to be another case where banks are collecting a service charge for discharging services which were free till recently."

A top official of a Mumbai based nationalised bank requesting anonymity averred the situation, "fixing of a service charge on the deposit of any warrant not based on a direct recommendation of the investor or depositor is not practical or correct."