Nowhere banking

The decision by ICICI Bank to stop its "anywhere banking" service that allowed customers to deposit cheques in any bank branch instead of just the home branch, is a short-sighted one.

Ostensibly, the reason for the change in customer facilities is that smart traders are misusing the facility. Traders, who should normally be opening current accounts, are now opening savings accounts instead "" but, with "anywhere banking" what happens now is that when their associates, sometimes even residing outside the city, deposit cash in their savings bank accounts, the traders have instant access to it, free of cost.

In effect, they have a savings bank account that is functioning just as well as a current account. Customers, needless to say, gain from the move since savings accounts offer them higher interest rates and also require them to hold lower levels of minimum balances in the account.

Under the new proposal, beginning next month, customers will be charged a certain fee for depositing funds at non-home branches. Other banks, like HDFC Bank and Global Trust Bank have even put limits on the amounts that can be withdrawn from non-home branches.

Whatever sense the moves may make from the bank's point of view, they are plain wrong from the customers' point of view. In fact, in the longer run, they even go against the bank's own interests.

Till just a few years ago, when customers were wary of banking with banks that had very limited branch networks in comparison to the public sector behemoths, the argument given was precisely the "anywhere banking" one. The argument was that, thanks to the miracle of technology, banks didn't need to have full-fledged branches, they could have ATMs at different locations, and customers could use these.

Thanks to technology, banks didn't even need to have their own dedicated ATMs, these could be shared across banks. And with computers allowing instant updating of customer records, customers averse to using ATMs or the Internet, could transact in any branch of the bank "" so, while a Canara Bank customer in the Nehru Place branch couldn't transact business in the Connaught Place branch of the same bank, an ICICI Bank customer had the flexibility to go to any ICICI Bank branch. To use the advertisement slogan from the Iridium global phone, geography was now history.

All this was designed with one goal in mind "" to get the customer out of the bank, onto the Internet, in the ATM booths, where it would be more economical to serve him. The most extreme example of this attempt to move customers out of the bank branch was HSBC Bank which, in fact, even began levying a fee for withdrawing cash from the bank branch instead of from the ATM "" fortunately, it has now stopped this procedure.

By now imposing restrictions like the ones ICICI Bank is contemplating, apart from feeling let down, customers will be forced to flock back to the banks, defeating the original purpose. Another shortsighted move that is certain to drive away customers is the practice of charging for using non-branch specific ATMs.

Today, while a customer of IDBI Bank's Connaught Place branch can, for instance, withdraw cash from the ATM at Connaught Place without paying any service charge, if he withdraws even Rs 100 from the Janpath ATM of, say ICICI Bank, there will be a service charge of Rs 55 (and Rs 25 for checking out the bank balance).

In other words, while choosing which bank to open an account in, customers will once again begin looking at the number of branches the bank has, and the number of dedicated bank-ATMs.

 In other words, it's back to the past.