Charges on certain transactions is the banks’ latest wheeze to extract cash from account holders. Consumer activists say this is the beginning of the end of free banking and want banking regulator RBI to intervene. But the latter’s inaction indicates this particular salami slicing isn’t out of turn. Truth is, it costs a bank to maintain and service accounts, and the ugly reality is, we never had a free bank account. We have been paying for a legion of things from non-maintenance of minimum balance, account closure, cheque book requisition, duplicate account statement, and so on.
It’s possible some charges were waived as banks were building size and some transaction costs were subsidised. But charges always existed and this bit of financial arcana has passed over our heads. Now that banks have their size, they seem to be thinking only one thing: If customers are paying for postage and packing while shopping online, why not for all our services? Even in developed countries, there’s no free banking and levying a fee is reasonable and proportional to the transaction cost. But such fee is tolerable due to superior service. Take Canada, where each account holder has a professional personally assisting, and establishing a relationship, unlike our grumpy tellers or the irritable IVR system.
For years, banks have lent unsustainable amounts to people like Vijay Mallya and lost out sorely. Shouldn’t banks go after them recovering what’s rightfully theirs, instead of biting the small fish and imposing ‘nominal’ fee to make money? In this looming cost vs income battle, it’s the consumers who are put in the crosshairs once again, not big, risky borrowers or wilful defaulters. Bankers say these charges compel customers to go cashless. The bottom line is, consumers end up with the worst of both worlds: Paying for accounts but slapped with unfair charges, opaque products, poor service, when actually, the price of banking, be it physical or digital, should put them squarely in the middle.