Department of Banking Operations and
Development
Central Office
Frequently
Asked Questions (FAQs) on
Reserve Bank’s Instructions on Banking Matters
INDEX
I. DOMESTIC
DEPOSITS
II. DEPOSITS OF NON-RESIDENT INDIANS (NRIs)
III. ADVANCES
IV. ADVANCES
AGAINST SHARES AND DEBENTURES
V. DONATIONS
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.
III. ADVANCES
25. What is the meaning of
the word ‘Free’ in the lending rate prescription?
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
prescription 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?
No.
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.
V. DONATIONS
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/ subscriptions 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.