IBA committee recommendations on service charges sent to RBI

The Reserve Bank of India (RBI) has been receiving complaints from the customers regarding excessive charges being taken by banks for various services. RBI had asked IBA to suggest guidelines on this. IBA asked its Committee for Customer Service, headed by Standard Chartered Bank CEO Neeraj Swaroop, to prepare a report on this. A sub-committee headed by Union Bank of India Executive Director S Raman was tasked with framing the guidelines.

Committee of the IBA has finally prepared recommendations on the fees that banks should charge for basic services such as issuing a draft, remittances or for stop-payment instructions. The committee has been working on this for some months.

The recommendations will be sent to the Reserve Bank of India. A banker who was on the committee said, "The committee members have agreed on caps on charges for different services and once these are approved by RBI, banks will not charge customers above the caps."

The committee was to give recommendation on 27 items categorized as basic transaction services. The charges included- issuing cheque books and drafts, the committee also looked at charges for cheque return, reviving inoperative accounts, issue of duplicate pass books and other items such as not maintaining the prescribed minimum balance. However the charges for special services such as loans and credit cards were not part of the purview.

At present there is a wide disparity in charges being taken by different banks. For instance, public sector lenders such as the State Bank of India (SBI) customer is required to maintain minimum average balance of Rs 1,000 per quarter in regular savings account. While the account holder of private sector bank such as ICICI Bank and HDFC Bank is required to maintain a minimum balance of Rs 10,000. In foreign banks such as Citibank, Standard Chartered and HSBC account holders are required to maintain minimum balance of Rs 25,000 per quarter.

Private and foreign banks have high penalties for non-maintenance of minimum balance. ICICI Bank and Citibank charge Rs 750 per quarter; SBI, only Rs 75 per year for such non-maintenance.

RBI has instructed banks to prominently display their service charges and fees on their website in an RBI-prescribed format. Before 1997, IBA used to formulate guidelines for service charges and fees, later RBI gave banks a freehand to frame their own charges.