What changed
Previously, the Indian Banks' Association (IBA) prescribed out-of-pocket expense rates for member banks. RBI has now decided to do away with that practice, allowing each bank to independently determine and recover these expenses.
What it means for you
Banks gain pricing flexibility for ancillary services like courier and SWIFT, enabling them to align charges with their actual cost structures. However, they must ensure charges remain reasonable and cost-based to avoid customer disputes or regulatory scrutiny.
What you must do
- Review and update internal policies for recovering out-of-pocket expenses to reflect actual costs.
- Ensure charges for courier, telecom, and SWIFT are reasonable and documented on a cost basis.
- Communicate the revised expense recovery approach to relevant branches and customer-facing teams.
- Monitor customer feedback to prevent complaints about arbitrary or excessive charges.
Who it affects
All scheduled commercial banks (excluding RRBs), Bank operations and treasury departments
What are out-of-pocket expenses in banking?
They are costs banks incur for specific activities like courier, document dispatch, telecommunications, and SWIFT operations, which are passed on to customers.
Can banks now charge any amount for these expenses?
No, charges must be reasonable and strictly on an actual cost basis. Banks cannot arbitrarily set high fees.
Does this circular apply to Regional Rural Banks (RRBs)?
No, it explicitly excludes RRBs. Only scheduled commercial banks (excluding RRBs) are covered.