Moneycontrol
Mar 20, 2017 08:17 PM IST | Source: Moneycontrol.com

COMMENT: Here's why we should happily pay our ATM fees

The minimum balance limit news clashed with that of private sector banks charging for withdrawals above four free transactions, thus triggering a debate in social media. ICICI Bank, HDFC Bank and Axis Bank are charging a minimum of Rs 150 per transaction on deposits or withdrawal beyond the first four transactions.

 
 
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There was an outcry in social media when State Bank of India decided to re-impose a monthly average balance requirement of Rs 5,000 for branches in six metros. For rural, semi-urban and urban branches the minimum requirement is kept at Rs 1,000, Rs 2,000 and Rs 3,000, respectively. A fine anywhere between Rs 20 to Rs 100 will be imposed in case the balance falls below this limit.

The minimum balance limit news clashed with that of private sector banks charging for withdrawals above four free transactions, thus triggering a debate in social media. ICICI Bank, HDFC Bank and Axis Bank are charging a minimum of Rs 150 per transaction on deposits or withdrawal beyond the first four transactions.

Some reports say that the government is not pleased with the move and is considering asking the country’s largest bank to roll back the monthly average balance. This would send a wrong signal from the government and would have a demoralising effect on banks who supported the government’s demonetisation move and had to handle the resultant mess.

First of all ,the uproar is uncalled for since SBI already had a monthly average balance requirement until 2012. In order to increase their deposit base the bank removed the provision for minimum balance. Post demonetisation the bank was flush with funds and there was no reason for continuing with the provision for a zero balance account.

But there is a cost for banks to maintain the remaining zero balance accounts as banks have to maintain records of the account irrespective of any transactions taking place in it. They further have to provide for cheque books, ATM cards and monthly statements. After all, this is why banks globally have charges for maintaining a bank account.

As for the question of ATM charges after the first four transactions, this the last thing that the government should be complaining about, especially after demonetisation. Large amount of cash deposits and transfers requires excess banking staff and the logistics to manage cash. Reports say that cost of cash logistics in the country is around Rs 20,000 crore every year. Most of this cost is borne by individual banks and the central bank. Banks are trying to recover a part of this cost by charging for ATM withdrawals.

Finally, banks and their board members are answerable to shareholders. Lower profits would not only affect the bank’s worth in the markets but also leave little capital in its hand to expand and lend more.

For individuals, better money management and the increased usage of digital transactions is the way ahead.
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