UCBs: Scheme for Reasonable Bank Charges

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CO. BPD. (PCB). No. 31/12.05.001 / 2006-07 March 9, 2007 Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir / Madam, Report of the Working Group to formulate a scheme for ensuring reasonableness of bank charges Please refer to our circulars UBD. BPD. PCB. Cir. 54 / 09.39.000 / 2005-06 dated May 26, 2006 and UBD.PCB.Cir.No.4 /09.39.000/06-07 dated July 24, 2006 on display of service charges by urban co-operative banks. 2. As announced in the Annual Policy Statement for the year 2006-07 , in order to ensure fair practices in banking services, Reserve Bank of India had constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges. The Working Group has since submitted its report. The recommendations of the Working Group have been examined and accepted by Reserve bank of India with certain modifications. 3. Action required to be taken by urban co-operative banks is indicated under the column "action points for banks" in the Annex to this circular. Yours faithfully, (S.S.Barik) General Manager Annex Recommendations of the Working Group to formulate a scheme for ensuring reasonableness of bank charges Sl. No. Recommendations of working group as accepted by RBI Action points for banks 1 Identification of basic banking services Banks have to follow two broad parameters for identifying the basic banking services: (A) Nature of transactions (a) Banking services that are ordinarily availed by individuals in the middle and lower segments, will be the first parameter. This will comprise services related to deposit/loan accounts, remittance services and collection services. (b) When the above transactions occur in different delivery channels, for the purpose of pricing, they may be treated on a separate footing. (B) Value of transactions Low value of transactions with customers / public up to the ceiling as given below will be the second parameter: Remittance upto Rs. 10,000/- in each instance Collections below Rs. 10,000/- in each instance. (Foreign exchange transactions valued up to $ 500/-) Based on the two parameters, the Working Group recommends enumeration of the following as the basic banking services: Sr. No Service Relating to deposit accounts 1 Cheque book facility 2 Issue of Pass Book (or Statement)/Issue of Balance Certificate 3 Issue of duplicate pass book or statement 4 ATM Cards 5 Debit cards (electronic cheque) 6 Stop payment 7 Balance enquiry 8 Account closure 9 Cheque Return – Inward (Cheque received for payment) 10 Signature verification Relating to loan accounts 11 No dues certificate Remittance facilities (including through other banks) (Rupee or foreign exchange) 12 Demand Draft – issue 13 Demand Draft – Cancellation 14 Demand Draft – revalidation 15 Demand Draft – Duplicate issuance 16 Payment Order – issue 17 Payment Order – Cancellation 18 Payment Order – revalidation 19 Payment Order – Duplicate issuance 20 Telegraphic Transfer—Issue 21 Telegraphic Transfer – Cancellation 22 Telegraphic Transfer – Duplicate Issuance 23 Payment by Electronic Clearing Services (ECS) 24 Transfer by National Electronic Fund Transfer (NEFT) and Electronic Funds Transfer (EFT) Collection facilities 25 Collection of Local Cheques 26 Collection of Outstation Cheques 27 Cheque Return – Outward (Cheque deposited for collection) The above list is compiled only as a guide and the list may not be treated as exhaustive. Banks, may at their discretion, include within the category of basic services such additional services as they consider appropriate. As indicated in annex -1 to circular UBD (PCB) Cir. No. 54/09.39.000/05-06 dated May 26, 2006. The list of services identified is only an indicative one and banks may, at their discretion, include within the category of basic services such additional services as they may consider appropriate. 2 Offering basic banking services outside the scope of bundled products Some of the banks do not levy charges on each individual product or service. Products and services are bundled and offered to a customer as a composite offering. The bank recovers the cost of these operations through net interest income. The bank achieves break-even levels through higher average balances in customer accounts which yield healthy interest margins or by imposing charges for keeping inadequate balances. In so far as the basic services are concerned, the bank's objective should be to ensure that these are made available to the users at reasonable prices / charges and towards this, the basic services should be delivered outside the scope of the bundled products. Banks may 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. 3 Principles for ensuring reasonableness in fixing and communicating the service charges (a) For basic services to individuals, the banks will levy charges at the 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 will levy charges on more liberal terms than the terms on which the charges are levied to other individuals. (c) For the basic services rendered to individuals, banks will levy charges only if the charges are just and supported by reason. (d) For the basic services to individuals, the banks will levy service charges ad-valorem only to cover any incremental cost and subject to a cap. (e) Banks will provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services. (f) Banks will provide advance information to the individual customers about the proposed changes in the service charges. (g) Banks will collect for services given to individuals only such charges which have been notified to the customer. (h) Banks will inform the customers in an appropriate manner recovery of service charges from the account or the transaction. Banks will without fail inform the customers in all cases when a transaction initiated by the bank itself results in or is likely to lead to a shortfall in the minimum balance required to be maintained. The principles for ensuring reasonableness in fixing and communicating the service charges, as enunciated by the Working Group, may be adopted / followed by banks. 4 Disclosure and notification of service charges: It is imperative that the customers are made aware of the service charges upfront and the changes in services charges are implemented only with prior notice to the customers. For changes made in the charges, the notice to customers need not necessarily be to each individual customer, as it would be costly and impractical. The Working Group finds that for proper disclosure, the banks would do well to fully recognize the following needs of the customers and take steps to ensure that these are met: (A) Disclosure of the service charges: Banks may consider the optionof carrying out a onetime publicity of the service charges so that all customers are made aware of the charges; The need for communicating the service charges to the new customers at the time of beginning of the relationship. The need for displaying the charges in the notice board at the branch and advertising in newspapers, so as to disseminate information to the customers/public, in addition to display on the website as per Reserve Bank instructions. The need for using appropriate method for communicating the service charges to customers of different profiles. (B) Notifying the changes effected in the charges The need for effecting any change in the charges only with prior notification to the customers of at least 30 days. The need for providing an option to the customer to accept the change and if not accepted, to exit from the relationship with the bank within the above 30 days without any cost. Banks may consider the option of advertising the changes in newspapers. The need for including the information regarding the changes in any communication sent to the customer. The need for displaying prominently in the notice board as well as the website all the changes effected in the preceding 30 days Banks may take steps to ensure that customers are made aware of the service charges upfront and changes in service charges are implemented only with the prior notice to the customers. 5 Other recommendations (i) Deficiencies in the redressal of grievances about service charges Deficient grievance redressal in the banks, including a process of prolonged correspondence, always leads to complaints being escalated to the Banking Ombudsman/Reserve Bank of India. Banks are therefore required to have a robust grievance redressal structure and processes to ensure prompt in-house redressal of all their customer complaints. (ii) Financial Education The Working Group recommends that full-fledged information on bank products and their implications are to be disclosed to the customers so that the customers can make an informed judgment about their choice of products. The recommendations of the Working Group relating to redressal of grievances and financial education, as brought out in column 2, may be implemented by banks. 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/284 · issued 09 Mar 2007. The plain-English explanation above is BankPulse’s own independent summary.

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