Are Banks Fair In Levying Steep Penalties?   Mar 10, 2017

March 10, 2017
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Did you hear any noise?


Spare some time to check your bank account.

It might show a crater.

Don’t be surprised if people start using ‘bang’ and ‘bank’ interchangeably someday.

Post demonetisation, banks have been aggressively imposing higher penalties on their customers and hiking transaction charges across the board.

Have they become shylocks, all of a sudden?

Let’s find out…

Although banks have arbitrarily raised transaction charges, minimum balance requirement, and card fees in some cases, they haven’t done anything unlawful. Fact is, the RBI offers them that liberty.

Then what’s the trouble?
As India is a cash dominant economy, banks always struggle to retain deposits. However, the note ban changed the dynamics of the banking industry. The Government is now promoting a less-cash economy, and banks are hopeful that, if they somehow manage to discourage the cash withdrawals, they might solve their chronic problem.

Change in fee structure…
In a way, it would be prudent to infer that banks have become aggressive in their fee structure in an attempt to retain the low-cost deposits they managed to garner during demonetisation.

HDFC Bank, ICICI Bank, Axis Bank, and SBI have done a major rejuggle in the fee structure. SBI has hiked the minimum balance requirement from Rs 1,000 to Rs 5,000.  While its private sector counterparts will soon charge you a higher fee for branch banking transactions. Moreover, a bank debit card may cost you as high as Rs 950 p.a. and your bank may charge you Rs 600 excluding taxes for non-maintenance.

Should you worry about this?
Primarily, you need to understand, you still get 8 to 10 ATM transactions free (when home ATM and non-home ATM limits are clubbed) in a month. This means you can withdraw money every fourth day. Banks have placed daily withdrawal limits, however considering the average quantum of withdrawals of a common man, they are high enough.

Banks charge you a fee for using online money transfer options such as Immediate Payment Service (IMPS) and Real Time Gross Settlement (RTGS), but they offer you a convenience. Apparently, there’s no change in these costs of late, at any bank. 

It’s noteworthy that, not all banks have hiked fees and the minimum balance requirements.

In other words, you have multiple alternatives. For example, if you receive your salary in one bank, you may transfer a part of the money to another bank account. Now effectively you get 16 to 20 free ATM transactions. Because in place of just one bank account, you are using two bank accounts. Most of the nationalised banks and major cooperative banks haven’t discouraged branch banking or ATM transaction, so far. Take advantage of this.

Bank less with banks that charge you more, or you may avoid them altogether if you don’t want to pay for the service. But this won’t absolve banks that have hiked fees abruptly.

Interestingly, top bosses of these banks have been candidly supporting their moves that too in a blithe arrogance.

Mr Aditya Puri, Managing Director of HDFC Bank made a ridiculous comment while speaking to media on this topic. He said, “You don’t go to Oberoi Hotel and ask for Mahesh Lunch Home rates.”

In defence of latest changes in the fee structure at HDFC Bank, Mr Puri asked a counter question. “We get a Rs 10,000 savings bank deposit. I have to pay 4% interest, 4% I have to keep as CRR. I earn around Rs 200 in one year. In this Rs 200, what all you want? Free ATM you want, no cheque book charge you want, no cash handling charge you want, he added.

For the sake of argument, let’s assume bank customers are crying wolf. And ideally, customers shouldn’t expect a free lunch, least of all from shylocks.

But hope banks – who’ve been aggressive in their fee structure – realise that the charges are effectively eroding what a common man would earn on their savings bank account.

Likewise, banks should also be ready to pay the penalty for the deficient services. For example, if a home-ATM is not in working-order, which is why a customer is forced to use the ATMs of other banks, the bank shall have no qualms in paying the compensation to the customer for such inconvenience.

Five-star rates shall be charged only for five-star services.

Banks that are busy teaching money wisdom to customers, will struggle for fresh air should customers start demanding bang for their buck.

Consider the case of data breaches…

How much shall a bank pay you as compensation in a ‘five-star suit’?

How much compensation customers shall demand for being mis-sold banking and third party products?

Certainly at a five-star rate.

To conclude…
In a highly competitive banking environment, customers should be ready to pay for the quality services without making much noise. But similarly, the banks shall also be willing to pay “inconvenience fees.”

After all, in a luxurious sea-facing five-star suite, you can’t afford to install a table fan in place of air conditioner and yet expect the customer to pay.

Isn’t it time to hold up the mirror to brazen banks?<


The Government has taken one more step to make affordable housing a success.

After waiving off the service tax on affordable housing, the Government has planned to offer one more incentive.

Now it's the turn of stamp duty to go.

Recently, the Urban Development and Housing Ministry directed states to forgo stamp duty on the registrations of houses falling under affordable housing. 

State Governments levy stamp duty in the range of 4% to 8% depending on the finances each state. Typically, a State Government that has limited income sources but higher expenditure budgets, usually, impose a higher duty and vice-a-versa.

Speaking about the development Minister for Urban Development, Mr Venkaiah Naidu, said, "Input tax credit will be available, thus creating a huge incentive to bring all transactions in the sector within the formal system. We are addressing the need to rationalise stamp duty, and are asking for waiver of stamp duty for affordable housing." 

He further added, "The proposed implementation of Goods & Services Tax will not increase prices of real estate, especially of affordable housing. We have already exempted affordable housing from service tax, and my ministry is addressing the need to continue this exemption under GST." 

In the Budget 2017-18, the Government has made some favourable announcements for the affordable housing segment—the most important of them was to award the infrastructure status to the sector.

Besides, the ban on using currency in high-value transactions, with the implementation of Benami Transactions (Prohibition) Amendment Act, establishments of the real estate regulator and the implementation of GST are likely to show positive effects on affordable housing.


In three weeks' time, the Financial Year (FY) 2016-17 will end. 

If you speak to anyone working in the accounts department of a big company, especially a bank, he/she will tell you how hectic it gets as the fiscal year-end approaches.

Preparing financial statements for the whole year and tallying the balance-sheet is much a bigger task than it appears. 

For banks, it's not only a big task but a very complicated and painful one as well, considering the asset quality issues they are facing at the moment. 

By now, even the most reluctant investor knows that banks are struggling to offload stressed assets from their balance sheets. Loan recovery remains the worst challenge and making provisions for Non-Performing Assets (NPAs) has been denting profits. Flat credit growth and even thinner profit growth is choking banks. 

Finding themselves beset from all sides, they have approached RBI for relief. In their latest communication, they have sought some relaxation in guidelines governing the debt recast schemes. The RBI has floated three restructuring schemes till date: Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR), and Sustainable Structuring of Stressed Assets (SA). 

All of them have achieved no real success in curtailing the asset quality issues in the corporate loan book. 

Banks believe stringent rules of restructuring have hindered these schemes from taking off. 

To read more about this story and Personal FN's views over it, please click here.


General Motors 
HCL Corporation 
Apollo Hospitals 
State Bank of India 
Punjab National Bank 
ICICI Bank and 
Axis Bank. 

Do you know the one thing these companies have in common?

They are headed by women.

Today of course, it isn't an extraordinary achievement in developed nations for women to hold top corporate positions. 

However, in a patriarchal country like India, this is an extraordinary feat. 

Once women were denied the right to education in India, from there, we, as a society, have come a long way. 

Today, women stand shoulder to shoulder with men in every field. 

To read more about this story and Personal FN's views over it, please click here.

The Central Government has decided to hike Dearness Allowance (DA) for the employees working in various Government departments. Nearly 50 lakh employees will get a 2% hike in DA.

However, the president of Confederation of Central Government Employees', Mr KKN Kutty, expressed his dissatisfaction by calling this hike ‘meagre’. He opined that the Consumer Price Index for Industrial Workers (CPI-IW) is a poor benchmark to calculate the impact of inflation on Government employees.

Distressed Securities: Distressed securities are financial instruments issued by a company that is near to or currently going through bankruptcy. As a result of the issuing company's inability to meet its financial obligations, these financial instruments have suffered a substantial reduction in value, but because of their implicit riskiness, they offer investors the potential for high returns. Distressed securities can include common and preferred shares, bank debt, trade claims and corporate bonds.

(Source: Investopedia)

Quote: "More money has been lost trying to anticipate and protect from corrections than actually in them. "- Peter Lynch


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