31 August 2017 | Moneylife Digital Team
With the Reserve Bank of India (RBI) having cut interest rates, banks have been quick to lower the interest rate on savings account from 4% to 3.5% on deposits up to Rs1 crore. State Bank of India (SBI) was the first to announce the cut and this means an immediate fattening of its bottom-line by as much as Rs4,000 crore at the cost of depositors. Remember, Indian banks had not raised savings account interest rate even when interest rates were soaring; but, as always, they are quick to cut. Other banks have followed SBI’s lead.
From 1 April 2017, SBI had announced the levy of a charge for failure to maintain a minimum quarterly balance in savings accounts. As Moneylife Foundation has said in its campaign against bank charges, this affects students and pensioners the most. SBI has always been the safe, go-to bank for both these categories of depositors. It is learnt that a Right to Information (RTI) application filed by Chandrashekar Gaud has shown exactly how the Bank has benefited.
SBI earned Rs235.06 crore as penalty from 38.87 million accounts only in the first quarter of this financial year. This means that the Bank could earn nearly Rs1,000 crore from such penalties alone. Given that banks are unable to recover their bad loans effectively, this appears to be the easy way to recover losses by penalising the most hapless depositors with the least amount of funds. According to a report in Dainik Bhaskar, SBI is deducting charges even from zero balance accounts of poor students, whose scholarship amount is less than what the Bank mandates as the minimum average balance (MAB).
The State-run lender has demanded that depositors maintain a minimum balance of Rs5,000 for urban and Rs1,000 for rural areas, failing which it levies penalty charges. Ironically, poor scholarship students in metro cities, such as Delhi and Mumbai, are also being forced to keep an impossible minimum balance of Rs5,000. So far, the government has not bothered to respond to pleas about such unconscionable charges. Moneylife has always argued that banks earn hefty spreads of over 7% on deposits which are among the highest spreads in the world; so banks have no reason to levy innumerable charges on ordinary depositors. SBI also levies Rs10+ service charges per ATM transaction, Rs20 for other bank ATM transactions, and Rs50 for branch transactions beyond the four free transactions per month.