Department of Banking Operations and Development
I. Domestic Deposits
II. Deposits Of Non-Resident Indians (Nris)
IV. Advances Against Shares And Debentures
VI. Loans For Premises
VII. Service Charges
I. DOMESTIC DEPOSITS
1. Whether banks can accept interest free deposits?
Banks cannot accept interest free deposits other than in current account.
2. Whether banks can pay interest on savings bank accounts quarterly?
Banks can pay interest on savings bank accounts at quarterly or longer rests.
3. Whether banks can pay interest on term deposits monthly?
Interest on term deposits is payable at quarterly or longer rests. In case of monthly deposit schemes, as per banking practice, the interest is calculated for the quarter and may be paid monthly at the discounted value.
4. Whether banks can pay differential rates of interest on term deposits aggregating Rs.15 lakh and above?
Differential rates of interest can be paid on single term deposits of Rs.15 lakh and above and not on the aggregate of individual deposits where the total exceeds Rs.15 lakh.
5. Whether banks can pay commission for mobilising deposits?
Banks are prohibited from employing/engaging any individual, firm, company, association, institution for collection of deposits or selling of deposit linked products on payment of remuneration or fees or commission in any form or manner except commission paid to agents employed to collect door-to-door deposits under a special scheme. Banks have also been permitted to use the services of Non-Governmental Organisations(NGOs)/ Self Help Groups(SHGs)/ Micro Finance Institutions(MFIs and other Civil Society Organisations(CSOs) as intermediaries in providing financial and banking services including collection of deposits through the use of the Business Facilitator and Business Correspondent models and pay reasonable commission/fees.
6. Whether banks can prematurely repay term deposits on their own?
A term deposit is a contract between the bank and the customer for a definite term and it cannot be paid prematurely at the bank’s option. However, a term deposit can be paid prematurely at the request of the customer subject to the terms of the contract, including penalty, if any.
7. Whether banks can refuse premature withdrawal of term deposits?
Banks may not normally refuse premature withdrawal of term deposits of individuals and Hindu Undivided Families (HUF), irrespective of the size of the deposit. However, banks at their discretion, may disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Banks should notify such depositors of their policy of disallowing premature withdrawals in advance, i.e. at the time of acceptance of deposits.
8. Whether banks can levy penalty for premature withdrawal?
Banks have the freedom to determine their own penal rates of interest for premature withdrawal of term deposits.
9. How and when are banks required to pay interest on the deposits maturing on holiday/ non-business working day/ Sunday?
Banks should pay interest at the originally contracted rate on the deposit amount for the holiday/ Sunday/ non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.
10. Whether banks can pay additional interest admissible to banks' staff on the deposit placed in the name of minor child/ children of the deceased members of staff?
No. Children (including minor) are not eligible for additional interest admissible to banks' staff members/ retired staff members.
11. Whether additional interest admissible to banks' staff can be paid on the compensation awarded by the court to a minor child and deposited in the joint names of minor child and parent?
No. As the money belongs to the minor child and not the banks' staff, additional interest cannot be paid.
12. Whether banks are permitted to offer differential rate of interest on other deposits?
Banks can formulate special fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest as compared to normal deposits of any size.
13. At what rate is interest payable on a deposit standing in the name of a deceased depositor?
a. In the case of a term deposit standing in the name/s of a deceased individual depositor, or two or more joint depositors, where one of the depositors has died, the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
b. In the case of balances lying in current account standing in the name of a deceased individual depositor/ sole proprietorship concern, interest should be paid only from May 1, 1983 or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposits as on the date of payment. However, in the case of NRE deposits, if the claimants are residents, the deposit on maturity is treated as a domestic rupee deposit and interest is paid for the subsequent period at the rate applicable to domestic deposits of similar maturity.
14. What are the guidelines for renewal of overdue deposits?
All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal, including interest rate, at the time of acceptance of the deposit. The policy should be non-discretionary and non-discriminatory.
II. DEPOSITS OF NON-RESIDENTS INDIANS (NRIs)
15. Whether concessional rate of interest is applicable when a loan against FCNR(B) deposit is repaid in foreign currency?
Banks have the freedom to fix the rate of interest chargeable on loans and advances against FCNR(B) deposits to the depositors without reference to their Benchmark Prime Lending Rate (BPLR) irrespective of whether repayment is made in Rupees or in Foreign Currency.
16. Whether banks can accept recurring deposits under the FCNR(B) Scheme?
No. Banks cannot accept recurring deposits under the FCNR(B) Scheme.
17. Who can fix the interest rates on NRE and FCNR(B) deposits?
The Boards of Directors of banks have been empowered to authorise the Asset-Liability Management Committee to fix interest rates on deposits within the ceiling prescribed by RBI.
18. Whether banks are permitted to offer differential rate of interest on NRE/ FCNR(B) deposits?
Yes. Banks are permitted to offer differential rates of interest on NRE term deposits as in the case of domestic term deposits of Rs.15 lakh and above within the ceiling prescribed. Regarding FCNR(B) deposits, banks are free to decide the currency-wise minimum quantum on which differential rate of interest may be offered subject to the overall ceiling prescribed.
19. What is meant by Reinvestment Deposit?
Reinvestment deposits are those deposits where interest (as and when due) is reinvested at the same contracted rate till maturity, which is withdrawable with the principal amount on maturity date. It is also applicable to domestic deposits.
20. Whether FCNR(B) deposits can be renewed with retrospective effect (i.e. from the maturity date)? If yes, what is the rate of interest payable?
A bank may, at its discretion, renew an overdue FCNR(B) deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive), does not exceed 14 days and the rate of interest payable on the amount of the deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days, the deposits can be renewed at the prevailing rate of interest on the date when the renewal is sought. If the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B) deposit, banks may fix their own interest for the overdue period on the amount so placed as a fresh term deposit. Banks are free to recover the interest so paid for the overdue period if the deposit is withdrawn after renewal before completion of the minimum stipulated period under the scheme.
21. Whether interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are applicable to loans denominated in foreign currency?
No. Interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are not applicable to loans denominated in foreign currency, which are governed by the instructions issued by the Foreign Exchange Department of RBI.
22. Under what circumstances additional interest over and above the declared rate of interest can be paid in case of FCNR(B) deposits?
In respect of deposits accepted in the name of –
a. member or a retired member of the bank’s staff, either singly or jointly with any other member or members of his/ her family, or
b. the spouse of a deceased member or a deceased retired member of the bank’s staff,
the bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest stipulated, Provided that –
i. the depositor or all the depositors of a joint account is/ are non-resident/s of Indian nationality or origin, and
ii. the bank shall obtain a declaration from the depositor concerned that the moneys so deposited or which may, from time to time, be deposited, shall be moneys belonging to the depositor as stated in clause (a) and (b) above.
iii. the rate fixed by the bank for deposits of staff members, existing or retired, should not exceed the ceiling rate prescribed by RBI.
Explanation: The word "family" shall mean and include the spouse of the member/ retired member of the bank’s staff, his/her children, parents, brothers and sisters who are dependent on such a member/ retired member but shall not include a legally separated spouse.
23. In the case of a deceased depositor’s NRE/FCNR(B) deposit, in the event of legal heirs effecting premature withdrawal before completion of the minimum prescribed period, whether any interest is payable?
No. A deposit has to run for a minimum stipulated period, which is at present one year for both FCNR(B) and NRE deposits, to be eligible to earn interest.
24. Whether banks can pay interest on NRE and FCNR(B) deposits for the intervening Saturday, Sunday and holidays between the date of maturity and payment?
Yes. Whenever the due dates fall on Saturday/Sunday/non-business working day/holidays, banks are permitted to pay interest on NRE and FCNR(B) deposits at the originally contracted rate for the intervening period between the due date and date of payment so that no interest loss is suffered by the depositors.
25. What is the meaning of the word ‘Free’ in the lending rate prescripttion?
Banks are free to fix Benchmark Prime Lending Rate (BPLR) for credit limits over Rs.2 lakh with the approval of their respective Boards. BPLR has to be declared and made uniformly applicable at all the branches. The banks may authorize their Asset-Liability Management Committee (ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board immediately thereafter. The banks should also declare the maximum spread over BPLR with the approval of the ALCO/Board for all advances.
26.(i) What are the ‘intermediary agencies’?
(ii) What are ‘housing finance intermediary agencies’?
An illustrative list of Intermediary Agencies is as under:
1. State Sponsored organizations for on-lending to Weaker Sections @
2. Distributors of agricultural inputs/ implements.
3. State Financial Corporations (SFCs)/ State Industrial Development Corporations (SIDCs) to the extent they provide credit to weaker sections.
4. National Small Industries Corporation (NSIC).
5. Khadi and Village Industries Commission (KVIC)
6. Agencies involved in assisting the decentralized sector.
7. Housing and Urban Development Corporation Ltd. (HUDCO)
8. Housing Finance Companies approved by National Housing Bank (NHB) for refinance.
9. State sponsored organization for SCs/STs (for purchase and supply of inputs to and/or marketing of output of the beneficiaries of these organizations).
10. Micro Finance Institutions/ Non-Government Organizations (NGOs) on lending to SHGs.
@ Weaker sections include –
i. Small and marginal farmers with landholdings of 5 acres and less, and landless labourers, tenant farmers and share-croppers;
ii) Artisans, village and cottage industries where individual credit requirements do not exceed Rs. 50,000/-;
iii) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY);
iv) Scheduled Castes and Scheduled Tribes;
v) Beneficiaries of Differential Rate of Interest (DRI) scheme;
vi) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
vii) Beneficiaries under scheme of Liberation and Rehabilitation of Scavengers (SLRS);
viii) Advances to Self-Help Groups (SHGs);
ix) Loans to distressed poor to repay their debt to informal sector, against appropriate collateral or group security.
Loans granted under (i) to (ix) above to persons from minority communities as may be notified by Government of India from time to time.
In states, where one of the minority communities notified is, in fact, in majority, item (ix) will cover only the other notified minorities. These States/Union Territories are Jammu and Kashmir, Punjab, Sikkim, Mizoram, Nagaland and Lakshadweep.
27. Whether banks can charge interest rate without reference to their own BPLR?
Yes. Banks are free to determine the rates of interest without reference to their BPLR and regardless of the size, in respect of following loans:
(i) a. Loans for purchase of consumer durables.
b. Loans to individuals against shares and debentures/ bonds
c. Other non-priority sector personal loans including credit card dues.
d. Advances/ overdrafts against domestic/ NRE/ FCNR(B) deposits with the bank, provided that the deposit/s stands/ stand either in the name(s) of the borrower himself/ borrowers themselves, or in the names of the borrower jointly with another person.
e. Finance granted to intermediary agencies (excluding those of housing) for on-lending to ultimate beneficiaries and agencies providing input support.
f. Finance granted to housing finance intermediary agencies for on-lending to ultimate beneficiaries
g. Discounting of Bills
h. Loans/Advances/Cash Credit/Overdrafts against commodities subject to Selective Credit Control
(ii) Loans covered by participation in interest refinancing schemes of term lending institutions -
Banks are free to charge rates as per stipulations of the refinancing agencies without reference to BPLR.
28. Whether it is in order for banks to have multiple BPLRs?
No. Since all lending rates can be determined with reference to the Benchmark PLR by taking into account term premia and/or risk premia, there is no need for multiple BPLRs. These premia can be factored into the spread over or below the BPLR.
29. Whether banks can grant fixed rate loans for purposes other than project finance?
Banks have the freedom to offer all loans at fixed or floating rates subject to conformity to their Asset Liability Management (ALM) Guidelines. Banks should use only external or market-based rupee benchmark interest rates for pricing of their floating rate loan products.
30. Whether the revised BPLRs will be applicable to the existing advances?
Yes. Banks are required to invariably incorporate the following proviso in loan agreements in the case of all advances, including term loans, enabling banks to charge the applicable interest rate in conformity with the directives issued by RBI, except in case of Fixed Rate Loans -
"Provided that the interest payable by the borrower shall be subject to the changes in interest rates made by the Reserve Bank from time to time".
31. Whether banks may charge interest below BPLR on loans above Rs.2.00 lakh?
Yes. At present, loans up to Rs.2 lakh carry the prescripttion of not exceeding the Benchmark Prime Lending Rate (BPLR) and on the loans above Rs.2 lakh, banks are free to determine the rate of interest subject to BPLR and spread guidelines. Keeping in view the international practice and to provide operational flexibility to commercial banks in deciding their lending rate, banks may offer loans at below BPLR to exporters or other creditworthy borrowers including public enterprises on the basis of a transparent and objective policy approved by the respective Boards.
32. Whether banks are permitted to charge interest below their declared BPLR under consortium arrangement to offer a rate comparable to that of the leader bank?
No. Banks need not charge a uniform rate of interest even under a consortium arrangement. Each member bank should charge rate of interest on the portion of the credit limits extended by them to the borrowers subject to their BPLR.
33. What should be penal rate of interest?
With effect from October 10, 2000, banks have been given the freedom to formulate a transparent policy for charging penal interest with the approval of their Board of Directors. However, in the case of loans to borrowers under priority sector, no penal interest should be charged for loans up to Rs.25,000. Penal interest may be levied for reasons such as default in repayment, non-submission of financial statements, etc. However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to service the debt and genuine difficulties of customers.
34. Consequent on the deregulation of interest rates on advances over Rs.2 lakh with effect from October 18, 1994, whether banks should pay DICGC Guarantee fees in respect of priority sector advances?
As regards DICGC Guarantee fees, banks have been given the discretion to absorb or to pass on the guarantee fees to the borrower in case of advances over Rs.25,000/- excluding advances to weaker sections. Banks should bear DICGC guarantee fees in respect of advances up to Rs.25,000/- and all advances to weaker sections.
35. Whether interest on loans and advances could be charged at varying periods ranging from monthly rests to yearly rests?
With effect from April 1, 2002 banks have been charging interest on loans and advances at monthly rests except in the case of agricultural advances (including short term loans and other allied activities) where the existing practice continues.
36. What rate of interest is chargeable on loans/ advances granted to Staff Members of the banks or Staff Members of Co-operative Credit Societies?
The interest rate directives on advances granted by banks will not be applicable to loans or advances or other financial accommodation made or provided or renewed by a scheduled bank, inter alia, to its own employees. Where the advances are provided by banks to co-operative credit societies formed by the banks' staff members for lending to constituents (i.e. staff of the bank), the interest rate directives of RBI will not apply in case of such advances.
IV. ADVANCES AGAINST SHARES AND DEBENTURES
37. Whether banks can sanction loans against the equity shares of the banking company to its directors?
38. Whether any ceiling has been fixed on the bank’s exposure to the capital market?
With effect from April 1, 2007 a bank's total exposure, including both fund based and non-fund based exposure, to the capital market in all forms covering its direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds; advances against shares to individuals for investment in equity shares (including IPOs), bonds and debentures, units of equity-oriented mutual funds and secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; all exposures to Venture Capital Funds (both registered and unregistered) should not exceed 40 per cent of its net worth, as on March 31 of the previous year. Within this overall ceiling, the bank’s direct investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its net worth. For computing the ceiling on exposure to capital market, the bank’s direct investment in shares will be calculated at cost price of the shares.
The aggregate exposure of a consolidated bank to capital markets (both fund based and non-fund based) should not exceed 40 per cent of its consolidated net worth as on March 31 of the previous year. Within this overall ceiling, the aggregate direct exposure by way of the consolidated bank’s investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its consolidated net worth.
39. What is the definition of net worth of a bank?
Net worth would comprise of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets. No general or specific provisions should be included in computation of net worth. Infusion of capital through equity shares, either through domestic issues or overseas floats after the published balance sheet date, may also be taken into account for determining the ceiling on exposure to capital market.
40. Whether banks can make short sales of shares?
No. Banks are prohibited from making any short sales of shares.
41. Whether banks can invest in fixed deposits of non-financial companies?
There is no prohibition on banks’ placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934.
42. What should be the method of valuation for advances against shares/ debentures/ bonds?
Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.
43. Whether banks can sanction bridge loans to companies?
Yes. Banks can sanction bridge loans to companies for a period not exceeding one year against the expected equity flows/ issues as also the expected proceeds of non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/ or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/ funds. Bridge loans extended by a bank will be included within the ceiling of 40% of net worth prescribed for banks’ aggregate exposure to the capital market.
44. What is the ceiling on the quantum of loans which can be sanctioned by banks to individuals against security of shares, debentures and PSU bonds, if held in physical form and in dematerialized form?
Loans/ advances granted to individuals against the security of shares, debentures and PSU bonds should not exceed Rs.10 lakh and Rs.20 lakh, if the securities are held in physical form and dematerialized form respectively. The maximum amount of finance that can be granted to an individual for subscribing to IPOs is Rs.10 lakh. However, the bank should not provide finance to companies for their investment in IPOs of other companies. Banks can grant advances to employees for purchasing shares of their own companies under Employees Stock Option Plan (ESOP) to the extent of 90% of purchase price of shares or Rs.20 lakh whichever is lower. NBFCs should not be provided finance for on-lending to individuals for subscribing to IPOs. Loans/ advances granted by a bank for subscribing to IPOs should be reckoned as an exposure to capital market.
45. What is the margin stipulated for advances against shares held in physical form and dematerialised form?
A uniform margin of 50% has been stipulated for all advances against shares/ /financing of IPOs/issue of guarantees for capital market operations. Within this 50 percent margin, a minimum cash margin of 25 percent should be maintained in respect of guarantees issued by banks for capital market operations.
46. Is any margin stipulated for banks' exposure to commodity markets?
The minimum margin of 50% and minimum cash margin of 25% (within the margin of 50%), as stipulated in the case of banks' exposure to capital markets, will also apply to guarantees issued by banks on behalf of commodity brokers in favour of the national level commodity exchanges, viz, National Commodity & Derivatives Exchange (NCDEX), Multi Commodity Exchange of India Limited (MCX) and National Multi-Commodity Exchange of India Limited (NMCEIL) in lieu of margin requirements.
47. Whether banks can make donations?
Yes. The profit making banks may make donations during a financial year, aggregating up to one percent of the published profit of the bank for the previous year. However, the contributions/ subscripttions made by banks to Prime Minister’s Relief Fund and to professional bodies/ institutions like Indian Banks’ Association, National Institute of Bank Management, Indian Institute of Bankers, Institute of Banking Personnel Selection, Foreign Exchange Dealers Association of India, during a year will be exempted from the above ceiling. Unutilised amount of the permissible limit of a year should not be carried forward to the next year for the purpose of making donations.
48. Whether loss-making banks can make donations?
Yes, loss making banks can make donations up to Rs.5 lakh only in a financial year.
49. Whether overseas branches of the banks can make donations abroad?
Yes, the overseas branches of the banks can make donations abroad, provided the banks do not exceed the prescribed ceiling of one per cent of their published profit of the previous year.
VI. LOANS FOR PREMISES
50. What are the norms and procedure laid down by RBI for acquisition of accommodation on lease/ rental basis by commercial banks for their use, i.e. for office and residence of the staff?
i. The Board of Directors of the banks should lay down the policy and formulate operational guidelines separately in respect of metropolitan, urban, semi-urban and rural areas covering all areas in respect of acquiring premises on lease/ rental basis for the banks’ use. These guidelines should include also delegation of powers at various levels. The decision in regard to surrendering or shifting of premises other than at rural centers should be taken at the central office level by a committee of senior executives.
ii. The Board of Directors of the bank should lay down separate policy for granting of loans to landlords who provide them premises on lease/ rental basis. The rate of interest to be charged on such loans should be fixed as per the lending rate directives issued by RBI with BPLR as the minimum lending rate for the loans above Rs.2 lakh. The rate of interest may be simple or compound, in accordance with the usual practice of the bank, as applicable to other term loans.
iii. Banks should provide a suitable mechanism for redressing the genuine grievances of the landlord expeditiously.
iv. The details of negotiated contracts in respect of advances to landlords and rental (including taxes etc. and deposits of Rs.25 lakh and above) on premises taken on lease/ rental by the public sector banks, should be reported to the Central Bureau of Investigation (CBI) as per the extant Government instructions. This requirement will not be applicable to banks in the private sector.
VII. SERVICE CHARGES
51. Is there any ceiling on service charges to be levied by the banks?
Indian Banks’ Association (IBA) has dispensed with the practice of prescribing service charges to be levied by banks for various services rendered by them. With effect from September, 1999, the Reserve Bank has granted freedom to banks to prescribe service charges with the approval of the respective Board of Directors.
As announced in the Annual Policy Statement for the year 2006-2007, in order to ensure fair practices in banking services, Reserve Bank of India (RBI) constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges, and to incorporate it in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). The Working Group, which examined various issues, such as basic banking/financial services to be rendered to individual customers, the methodology adopted by banks for fixing the charges and the reasonableness of such charges, has identified twenty-seven services related to deposit/loan accounts, remittance facilities and cheque collections, as an indicative list of basic banking services to be offered by banks. The recommendations of the Working Group have been accepted by RBI with certain modifications. Based on the recommendations of the Working Group, RBI has issued a circular DBOD. No. Dir. BC. 56/13.03.00/2006-07 dated February 2, 2007 to all scheduled commercial banks.
52. What are the parameters to be adopted for identifying basic banking services?
Banks have been advised to identify basic banking services on the basis of two parameters indicated by the Working Group, namely, (i) banking services that are ordinarily availed by individuals in the middle and lower segments and (ii) the value of transactions, namely, cheque collections and remittances up to Rs. 10,000 for each transaction and up to $500 for forex transactions. The indicative list of banking services includes services relating to Deposit Accounts (cheque book facility, issue of pass book / statement, ATM Card, Debit Card, stop payment, balance enquiry, account closure, cheque return - inward, signature verification); Loan Accounts (no dues certificate); Remittance facilities (Demand Draft – issue/ cancellation/ revalidation, Payment Order - issue/ cancellation/ revalidation/ duplicate, Telegraphic Transfer - issue/ cancellation/ duplicate, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT) / Electronic Fund Transfer (EFT); Collection Facilities (collection of local /outstation cheques, cheque return- outward). Banks are required to implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and towards this, delivering the basic services outside the scope of the bundled products.
53. What are the principles to be followed by banks in order to ensure reasonableness in fixing and communicating service charges?
Banks are required to follow the following principles for ensuring reasonableness in fixing and communicating the service charges -
(a) For basic services to individuals, banks should levy charges at rates that are lower than the rates applied when the same services are given to non-individuals.
(b) For basic services rendered to special category of individuals (such as individuals in rural areas, pensioners and senior citizens), banks should levy charges on more liberal terms than the terms on which the charges are levied to other individuals.
(c) For basic services rendered to individuals, banks should levy charges only if the charges are just and supported by reason.
(d) For basic services to individuals, banks should levy services charges ad-valorem only to cover any incremental cost and subject to a cap.
(e) Banks should provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services.
(f) Banks should provide advance information to the individual customers about the proposed changes in the service charges.
(g) Banks should collect for services given to individuals only such charges which have been notified to the customer.
(h) Banks should inform the customers in an appropriate manner recovery of service charges from the account or the transaction.
54. What are the other steps to be taken by banks?
Banks are required to take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with prior notice to the customers. Banks are also required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. Further, full-fledged information on bank products and their implications should be disclosed to the customers, so that the customers can make an informed judgment about their choice of products.