What changed
RBI accepted the Working Group's recommendations with modifications, requiring banks to identify basic banking services using two parameters: nature of transactions (services for middle/lower segments) and value (remittances up to Rs.10,000 in each instance, collections below Rs.10,000 in each instance, foreign exchange transactions valued up to $500). Banks must offer these services outside bundled products and ensure reasonableness in pricing.
What it means for you
Banks must now clearly define and separately price basic services like cheque books, passbooks, ATM cards, stop payments, and remittances up to Rs.10,000. This prevents hidden charges in bundled products and ensures transparency for retail customers. Lenders need to review their fee structures and product bundling practices to comply.
What you must do
- Identify basic banking services using the two parameters: transaction nature and value thresholds (remittances up to Rs.10,000 in each instance, collections below Rs.10,000 in each instance, forex transactions valued up to $500).
- Offer these basic services outside bundled products, ensuring separate pricing and transparency.
- Review and update your Fair Practices Code to incorporate the accepted recommendations.
- Prepare for compliance monitoring by the Banking Codes and Standards Board of India (BCSBI).
Who it affects
All scheduled commercial banks (excluding RRBs), Retail banking customers in middle and lower segments, Bank compliance and product teams
What are the basic banking services identified by the Working Group?
The indicative list includes services like cheque book facility, passbook/statement issuance, ATM/debit cards, stop payment, balance enquiry, account closure, cheque return, no dues certificate, demand drafts, payment orders, telegraphic transfers, ECS/NEFT/EFT, and collection of local/outstation cheques.
What are the value thresholds for basic services?
Remittances up to Rs.10,000 in each instance, collections below Rs.10,000 in each instance, and foreign exchange transactions valued up to $500 are considered low-value transactions for identifying basic banking services.
How should banks treat bundled products under this circular?
Banks must offer basic banking services outside the scope of bundled products. They cannot hide charges within composite offerings; instead, they must price these services separately to ensure reasonableness and transparency.