MULTIPLE SAVINGS A/CS CAN PINCH YOU HARD

Multiple savings bank accounts are costly. However, many account holders seem to be unmindful of them. Many people, say financial advisors, have 5-7 accounts with various banks. Some are the legacy of their previous jobs and some opened to avoid tax deduction at source on fixed deposits. But, with the minimum average quarterly balance required to maintain these accounts in many private sector banks going up to Rs 10,000, one blocks away a lot of money to keep these accounts alive. Last year, ICICI Bank, India's largest private sector bank, hiked the average quarterly balance (AQB) requirement in metros to Rs 10,000. Since then many private banks have raised the minimum amount required to keep the account active.The latest to join the race is IDBI Bank. It has doubled the AQB requirement to Rs 10,000 in the metros with effect from January. The banks have fixed lower amount of Rs 5,000 for the smaller cities. In case of foreign banks, they have a large minimum amount that goes up to Rs 1 lakh, depending upon the features and services opted by the customer. "The different AQB slabs in cities and semi-urban (areas) is because of the customers profile and the services they get,'' says K V S Manian, Kotak Mahindra Bank head--retail liabilities and branch banking. He says one should be quite clear as what one expects in terms of services from an account. But having too many accounts with several banks is a loss to the customer, who runs the risk of being charged, in case of a default. "It absolutely makes no sense to have more than 2-3 accounts. You may be unnecessarily blocking a lot of money in them,'' says Kartik Jhaveri, director, Transcend Consulting. "Earning just 3.5% interest on a saving account is not a great idea, when you can earn higher interest from fixed deposits,'' he adds. Long term fixed deposit offers rate of around 8%. Financial advisors also point out that people tend to keep more than the required money on them as the money is split on many accounts. "If you notice that your savings account balance is over Rs 50,000, normally you would think of transferring some money to a fixed deposit. But if there is Rs 20,000 in multiple accounts, the thought many not cross your mind,'' says a financial advisor, who doesn't want to be named. Jhaveri also points out that avoiding TDS at the hands of banks may land people in trouble. "It amounts to tax evasion. You are expected to pay tax on your interest income. If you don't do that, there could be a query or investigation from the income tax department and you could land in trouble,'' he says. – www.economictimes.indiatimes.com