In the good old days, banks took your money happily, gave us savings bank interest at four or five per cent per annum. However, this was based on the minimum balance between the tenth and the last date of the month. In other words, if you kept a lakh of rupees for 29 days and withdrew Rs 90,000 on the last date, you got interest on Rs 10,000 for the full month. Interest would be credited every half year to the account. We used our bank accounts to issue a few cheques, draw cash and ask for some remittances, which were never free.
In the process, the banker used a lot of our money for free or at a very low cost. As consumers, we could not demand anything more as the practices were the same across the banks. Of course, if you had lots of money, the branch manager would give you special favours. Like allotting a locker, giving you some demand drafts free and personally attending to you. Today, the change is revolutionary. The opening up of the sector brought in private banks which are eager to grow. They introduced the latest technologies and focused on giving us good service and conveniences. We now take it for granted that physical location does not matter, money is transferred instantaneously and banks can provide us with any service relating to transfer or moving money in an instant. In the beginning, the banks offered all of these services and more for free. They stole the consumers from the old age banks on the basis of more conveniences and speed. However, in this rat race, they offered everything for free. The revenue they gave up was like the ‘customer acquisition’ costs for them.
By now, most of us have got used to our private bank accounts. And today, the bank account is linked to everything from paying of a range of bills, linking our stock market, remittances, pensions, salaries etc. So, if we must change bank accounts, there is a range of collateral actions that should be done. All of them involve some element of form-filling and spending time and effort. So, we have become ‘addicted’ to a particular bank account.
Now the private banks have their hooks in to us. So we are faced with a sudden imposition of ‘charges’ and ‘fees’ for everything. Given that they are all listed entities and most of them have given generous “Esops” to their key employees, there is tremendous pressure to keep profits growing. In the early days, some private banks grew at a rapid pace. Soon they have reached a size, where the ‘rate’ of growth is getting smaller. Now they have to find newer ways to accelerate profits. Thus, we are seeing the introduction of ‘charges’ and fees for everything. For the bank, it is a simple exercise. For instance, a Rs 100 charge on a crore of accounts implies an additional Rs 100 crore of revenue per annum on a recurring basis. So it is a simple arithmetic at work. And the bank knows for sure that given the stickiness of the account number, it is unlikely that people will shift banks. More importantly, I think all banks are now acting in unison. If everyone imposes a charge, do you and I have an option?
What is worrying is the manner in which the charges are being levied. Banks are simply sending messages (often hidden in some email) saying that your account will be charged some monthly or quarterly fee for some basic service. And they will put it in fine print that if you do not want it you can ‘opt out’. So, it is not a fee that we were aware of in advance or agreed to. It is simple arrogance. And the knowledge that as consumers, we have no options. Then, there are some other ‘relationship’ charges that banks impose in a similar manner. If you shout, they reverse the charge. But less than one per cent of people shout, since most people do not notice small charges to their accounts. The banks do not have a regulator that works to protect the consumer. RBI has not bothered to do anything about this.
The banking “Ombudsman” to whom one can complain, is unlikely to do anything. He gets paid by the bank and will be loyal to them. Maybe it is time, we woke up and took to the consumer courts.
(The writer is a veteran financial advisor. He can be reached at balakrishnanr@gmail.com)
