Tuesday, March 7, 2017

Are the New Banking Fees and Charges Justified?

For the past few days, social media in India has been buzzing with memes and posts about the new fees and charges that banks like SBI, ICICI, HDFC, Axis have introduced. Some were true while many were actually incorrect interpretations of the proposed fees so I had listed down all the changes in the previous article

That being said, as a customer everyone is left wondering whether Banks are justified charging customers like this. I am going to try to answer that question in this article. 

Are Banks Justified to Introduce these Charges?

No, Absolutely Not. Don’t worry, I will explain why I feel banks are Not Justified to introduce these charges. 

What is the Reason Banks Quote for these Charges? 

With the government’s attempt at pushing forward toward a digital economy, the Banks are claiming that these charges will deter customers from continuing to depend on cash and use digital means instead. 

Could this be True?

I don’t think so. The Governments attempt at pushing forward toward a digital economy so far has been through incentives, discounts and benefits to people who choose digital means instead of cash. By piggybacking on the governments digital push, banks have just used this as an excuse to make a quick buck at the expense of the customer. If the banks wanted customers to take up digital transactions, they too could have incentivized customers to switch to cashless payments; instead they have chosen to penalize the customer for using cash. 

Is this the only reason why I think this sudden introduction of fees is Unjustified? 

Again, No. There are a few other reasons. 

Reason 1: Insufficient Penetration of Banking Services in Rural India

Yes, the Government has taken an ambitious step and asked banks to penetrate rural areas of our country and provide banking services to the folk who haven’t seen a bank in their life. All this is well and good. But, even today a vast majority of our Indian population is living in parts of the country where an ATM or Bank Branch is not as easily accessible as a Metro City. “Cash Rules” in those parts of the country. 

Reason 2: Customer is already paying for Access to his/her Cash

Firstly, all Banks already have a certain minimum balance requirement for the different types of bank accounts they offer depending on the branch location. Private banks in Metro areas charge as much as 10,000 or more rupees as minimum balance for customers who want to open a savings account. For customers who fail to maintain this minimum balance there is a penalty which gets charged. (Yes, Almost all banks do this. Why SBI is in the news right now is because of the volume "which is approx 30 crore accounts", that would be impacted due to their change in minimum balance limits)

They also charge a fee to issue an ATM or Debit card to customers. Depending on the type of Account you have, whether it is in a City or Semi-urban area or a village, this fee ranges from around 100 rupees to even a thousand or more rupees for premium co-branded cards. 

On top of this, banks offset a certain % of the interest rate from the loans they disburse to cover for their operational costs and only offer the remaining % to the Deposit customers. 

So, customers collectively have already paid for access to their cash and hence this new fees being introduced cannot be justified even if banks claim that, they are doing this to offset operational costs. 

Reason 3: Other Countries don’t Charge Customers like this 

Yes, the developed economies use digital transactions extensively but they also use cash. Take USA or Singapore as example (I am taking two country’s that I have lived in so that the points I share are “FACTS” and not something I read on the Internet) 

Yes, Banks have a minimum balance requirement but, there are no restrictions on visiting branches or using ATM network. In fact, even issuance of the first time Debit/ATM card is FREE. When I visit the ATMs that are inside the bank branch premises, I usually see a good number of people who are in their 60s or more because people of that age usually have problems using technology and hence prefer to transact in person by visiting the branch. 

Reason 4: These charges WILL NOT help the Push Toward a Digital Economy

With the introduction of these charges, a customer in an Urban or Metro area could still do a little bit of planning and withdraw cash in lump sum once a week and continue to spend “CASH” instead of withdrawing in small amounts every 2-3 days. 

Reason 5: Inconvenience to Senior Citizens and Rural Population

Yes, there are a lot of ATMs in Metro Cities and Urban Areas but a good % of bank customers are Senior Citizens and aged people who will enter the senior citizen category in the next 5-10 years. People of that age still find using an ATM a challenge and prefer the old-school Visit the Bank to get or deposit cash approach. 

As a continuation to Reason 1, ATM networks have not yet penetrated many parts of Semi-urban and rural areas of our country. 

So, by introducing an upper limit on both ATM and Branch transactions to people who either don’t have access to an ATM or don’t know how to use an ATM, banks have basically made sure that their only option is to visit the branch and pay this fee to gain access to their money. 

This I feel is unfair. 

Some Last Words: 

As always with any new development in our country, we have two groups – one that blindly supports the government or anything that is citing the government’s new initiatives as a reason. On the other hand we have the other group that blindly opposes anything that is initiated by the Government. 

Even though Banks claim to have done this to help with the push toward Digitization, like I explained above, this doesn’t seem to be the main reason. As the regulator of Banks the Reserve Bank of India must intervene and make sure that banks don’t take the customers on a ride and charge them unfairly. RBI should put forth guidelines that prevent banks from arbitrarily charging customers without sufficient justification. 

What are your thoughts on this new fees introduced by banks? Do share them in the comments. 

Disclaimer: This IS NOT a Politically motivated Article. The views expressed in this article are the Authors personal views. The Author is not affiliated to any Political Party or Group in India. Abusive and Foul language comments WILL NOT be Published. 


  1. True Anand.. RBI should not allow this and regulate. As you pointed, Banks should incentivize and not penalize to promote cashless transactions.

  2. Very true.. Anand Sir on one hand we the common man are trying hard to save each penny earned and other-side banks are getting in new form of looting us.. RBI and Government should not allow such things to happen.

  3. All the statements are true to the best of my knowledge and facts... From my view... RBI and central government should not support this kind of atrocities. We earn and we pay surcharges aah... that's too much...Imagine about a common low class community, how could they maintain a minimum balance 100,000. This statement is detrimental to a common man depending on daily wages. I think Indian central government should revisit these policies before they adopted... or else they should ask for public poll before releasing such implementations to the public....


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