Canara, Axis charge the most for banking services; IDFC First, Bandhan, AU SFB least

Until 1999, the Reserve Bank of India (RBI) prescribed what banks could charge for various services. Since then, banks have been allowed to set their own service charges, but RBI has emphasized that bank charges should be reasonable and linked to costs.

State-owned Canara Bank and Axis Bank, a private sector lender, have the highest service charges, while IDFC First Bank, Bandhan Bank and AU Small Finance Bank charge the least for the services they offer, a study by Moneylife Foundation has found.

The study Benchmarking Reasonableness of Service Charges by Banks in India talks of practices and also flags concern about service charges.

Among scheduled commercial banks, IDFC First Bank, AU Small Finance Bank and Bandhan Bank have charges that are exceptionally low or zero.

“Bandhan Bank is the only bank apart from State Bank of India (SBI) with zero average monthly or quarterly balance requirements. Separately, two large cooperative banks — Saraswat Bank and SVC Cooperative Bank — also have low charges,” the report, which was released on May 22, said.

Authored by Ashish Das from the Indian Institute of Technology-Bombay (IIT-B), the report, commissioned by Moneylife Foundation, was released by former deputy governor of Reserve Bank of India (RBI) SS Mundra.

On the other hand, Canara Bank and Axis Bank have the highest charge. “Canara Bank ranked lowest in the study for its extremely high service charges for services like 'DD Cancellation', 'Self-Generation of ATM PIN', 'mandatory-SMS alerts' and 'non-maintenance of average balance' in rural areas,” the report said.

Axis Bank has relatively higher charges, with a few outlier charges for “non-maintenance of balance” in metro and urban accounts, “non-financial transactions from own bank ATMs” and “failed Standing Instruction”, the report said.

Until 1999, the Reserve Bank of India (RBI) prescribed what banks could charge for their services. Since then, banks have been allowed to decide their charges, with the RBI stressing that these should be reasonable and linked to costs.

Additional recommendations

The report also flagged inconsistencies in penal charges imposed by banks for not maintaining minimum balance, with some banks applying disproportionately higher charges.

“There are 14 banks having a slab structure wherein, for each slab, the penal charges are constant in rupee terms. These banks impose a disproportionately higher penal charge in the lower slab of shortfalls than in the higher slabs,” the report said.

It also said Central Bank of India, Bank of Maharashtra, Bank of India and IDBI Bank, contrary to RBI advice, failed to pass on branch-based NEFT/RTGS service charge benefits to customers.