The party is over. Banks once chased you with cheap home loans, free credit card offers, zero ATM fees, free cheque leaves, and zero-balance accounts. They are now yanking off the welcome mats. If higher home loan interest rates are already beginning to bite, the hike in service charges is bound to sting.
Private banks are taking the lead by raising all kinds of charges. Can’t maintain an average quarterly balance (AQB) of Rs 5,000?
Beginning July 1, ICICI Bank will hit you with a charge of Rs 750 for every quarter that you fail to maintain the level. Senior citizens won’t be spared either; they will be hit with a smaller club: Rs 250 per quarter. There is more.
As long as AQBs remain below Rs 5,000, you will be billed Rs 50 at ATMs after five free transactions in a quarter. Without the minimum balance, even if you want to deposit cash at your branch, you will be billed Rs 60 each time after three free transactions.
UTI Bank will deduct Rs 350 for every returned cheque after May 1, and as much as Rs 750 if you make it a habit. After three returned cheques, you pay Rs 750 from the fourth onwards. So make sure you don’t get your dates or figures wrong on the cheque. UTI’s charges for non-maintenance of average quarterly balances are similar to ICICI Bank’s.
Your own money is now going to cost you a pretty penny if you withdraw it from ATMs that don’t belong to your bank. ICICI Bank will charge Rs 20 for cash withdrawals if the ATM happens to be run by a partner bank. If not, the charge rises to Rs 60.
For the time being, ICICI and UTI are the only banks that are raising charges, but others are waiting and watching. Centurion Bank of Punjab “will decide after looking at the reaction to ICICI bank’s hike,” said Harpreet Singh, Centurion’s business director for wealth management, distribution, and loans.
Public-sector banks are not yet ready to take the plunge but may do so later. The State Bank of India, the country’s largest, has no plan to raise rates “as of now”, according to Mahoora Ali, chief general manager.
“We have not yet raised rates but I can’t tell you about our future plans,” said Ajay Kumar, general manager, retail, Bank of Baroda. HDFC Bank’s executive vice-president Chitra Pandya said the bank has not raised rates. Any future changes will be implemented only after a month’s notice.
UTI Bank vice-president Anandya Mitra defended the bank’s decision to raise various charges.
“Costs are high and there is competition,” he said. “We expect customers to maintain certain balances in line with our service levels. Also, we have seen that some people misuse their savings bank accounts for current account purposes when there are no limits to transactions. We can’t tell these people to close their accounts, but we can charge them.”
ICICI Bank spokesman Charudatta Deshpande described the increase in service charges as routine: “It is an annual feature and in line with charges in the industry. The charges are for mismanagement of balances, which increases our costs and (leads to) misuse of our systems.”
Analysts see the banks’ move as an attempt to recover losses on interest margins caused by rising interest rates. Most banks have had to raise deposit rates steeply to increase resources for lending, but loan rates have gone up less steeply.
“ICICI Bank has been aggressively raising rates - interest rates and now service charges - to maintain its earnings growth in the face of a slowdown in retail banking,” said a representative of Brics Securities, a brokerage house. “We perceive the current move as one more step in that direction.”
Robin Roy, principal consultant at PricewaterhouseCoopers, said banks are trying to add to their revenue through alternative ways. “The (deposit) interest cost is increasing,” Roy said.
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