Bank penalties cost depositors Rs 5,000 crore in 2017-18

MUMBAI: Banks have collected penalties of close to Rs 5,000 crore in 2017-18 from depositors for not maintaining minimum balance in their accounts. The quantum of penalties has gone up despite banks opening 30.8 crore basic savings accounts for those who cannot afford to maintain minimum balance under the Jan Dhan Yojana scheme.The highest collection is by State Bank of India (SBI) which raised Rs 2,433 crore, nearly half of the total fines. Another 30% of the fines were raised by three large private lenders — Axis Bank, HDFC Bank and ICICI Bank.SBI is also the reason why penalties doubled in FY18. The bank reintroduced fines in FY18 after not collecting them for several years.‘Banks shift burden of corporate defaulters to common man’SBI has eased the minimum balance requirements since April this year. The penalties have also been eased. These followed a backlash after reports in January 2018 that SBI had collected Rs 1,700 crore in seven months of FY18.65276470 As a percentage of penalties to savings accounts, HDFC Bank, Axis Bank and Oriental Bank of Commerce have higher averages than SBI. Although banks do not divulge number of savings accounts, the debit cards issued by them (excluding Jan Dhan cards) is an indication of the number of regular savings accounts. The figures for fines were released in the Lok Sabha by junior finance minister Shiv Pratap Shukla on Friday in response to a query.According to Ashish K Das professor at Department of Mathematics in IIT Mumbai, who has authored several reports on bank charges, a key flaw in the conditions imposed by banks is that fines are not commensurate with the shortfall in deposits. So, depositors end up paying large penalties even when they miss the minimum balance requirement by a few rupees. This is not in keeping with the RBI directive which requires banks to ensure that charges are reasonable and not out of line with the average cost of providing banking services.Even if SBI’s Rs 2,434 crore were to be excluded, there is a rise of Rs 400 crore in charges for violating the minimum balance rule since since 2015-16 — the year of demonetisation. Although almost half the banks reduced their fines, the increase by other banks has more than made up the reductions. One reason for this is that PSBs are trying to increase fee collection to make up for losses due to bad debts. Public sector banks collectively lost Rs 85,361 crore due to provisions for non-performing assets in 2017-18. “In the process, banks are shifting the burden of corporate defaulters to the common man,” said Devidas Tuljapurkar, joint secretary, All India Bank Employees Association.Das in a report ‘Fault Lines in Implementation of Minimum Balance Rule’ highlighted how banks are saving close to Rs 50,000 crore paying only 4% on savings account average balances of Rs 25.1 lakh crore durning 2015-16. They earn additional Rs 28,000 crore not paying interest on current account balances of Rs 4.3 lakh crore.

from The Economic Times https://ift.tt/2MgltBF