SBI’s decision to charge on monthly minimum balance may lead to consolidation...

SBI’s decision to charge on monthly minimum balance may lead to consolidation of family accounts

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SBI's decision to charge on monthly minimum balance may lead to consolidation of family accounts

The state owned State Bank of India (SBI) rubs shoulders with its private sector peers like ICICI Bank and Axis Bank in the rather cramped BSE 30 or Sensex basket.

But it doesn’t mean it should ape them on banking practices impinging on customers. Last week, the private sector banking triumvirate HDFC, ICICI and Axis set the cat among pigeons by slapping an Rs 150 cash transaction charge on cash withdrawals or deposits in branches in excess of four a month.

Taking a cue and in a me-too spirit, the SBI too has announced its decision to hike steeply the average minimum monthly balance requirement from the hitherto Rs 500 to Rs 5,000 in respect of its customers in six metropolitan cities at the pain of penalty ranging from Rs 20 to Rs 100 with effect from 1 April 2017. What is more, the average minimum balance norm would also apply to current accounts with vengeance—Rs 500 for non-compliance is the penalty when current account unlike savings account does not earn interest for its depositors.

It has gone a step ahead of the private sector banks in so far as cash transaction charges are concerned by also targeting ATM withdrawals. It is good that the government has intervened to request SBI as well as private sector banks to withdraw these anti-customer moves. If they remain adamant, it may perhaps use its clout on the banking regulator RBI to ask it to issue a fiat to rein in the rampaging banks.

Private sector banks especially the elitist among them might have justification for mandating a minimum default balance of Rs 10,000 in savings accounts at the pain of penalty which they actually levy hungrily. But SBI is the bellwether common man’s bank. It has been perceived as one from times immemorial. It has by far the largest number of branches spread across the nooks and corners of the country with a sizeable rural presence too. It has a staggering 310 million savings bank accounts many of which were enlisted in the recent Jan Dhan drive the Prime Minister initiated in 2014 to make bank accounts a necessity.

For such a people-oriented bank to prescribe a steeply heightened minimum balance of Rs 5,000 albeit in select urban pockets is retrograde and could even be counterproductive. If the cash transactions charges of private sector banks could lead to the elitist customers splitting their money among three or four banks so as to break free of the free cash transactions limit of four a month per bank in what could be termed as a banker’s nightmarish vision of voting with feet, SBI might experience consolidation of family accounts. To wit, if three members of the family maintain accounts with a SBI branch, two of them might close their accounts and transfer their balances to the family patriarch or matriarch’s account so that s/he might ensure the minimum balance of Rs 5,000 which might be difficult for all the three of them to maintain separately.

At a time when the accent is on digitisation of payments that is impossible without banking support, the regressive moves of these banking biggies would have the effect of repelling people from the banking habit and retreat to the old habit of piling up cash and paying in cash. It is amazing that the SBI has prescribed a one-size-fits-all minimum balance requirement for those living in the six metropolitan cities because while a wealthy customer can easily keep say a minimum balance of Rs 1 lakh, for a worker living in a shanty Rs 5,000 might be a tall order. This despite Jan Dhan account holders having been spared from the Rs 5,000 minimum balance requirement because in Delhi for example in rehabilitation colonies there are a lot of poor people who opened bank accounts even before the Jan Dhan initiative. It is cruel to expect them to maintain a minimum Rs 5,000 balance.

SBI should think in terms of differential savings bank interest rate like Kotak Mahindra Bank which pays 6 percent per annum only if the balance is at least Rs 1 lakh. SBI similarly can say while the default rate of interest on savings account is 4 percent per annum it would pay stepped up rates for higher minimum deposits starting with Rs 10,000. For Rs 10,000, the depositor should earn 4.25 percent, Rs 20,000 4.5 percent and so on with a cap of say 5 percent. Carrot often works better than the stick.