(Vasudevan P N The author is MD & CEO, Equitas Small Finance Bank)
First of all, should there be any charges? If so, why??
Banking services have come a long way since the olden non-core banking days. Earlier people had to visit the same branch that caused inconvenience. Now, we can access accounts at any branch, and over any form factor. This happened principally due to high investments into technology, which is an animal requiring constant feeding of capital. We have to build multiple layers to ensure the system is always up and running. And with the kind of advancements also came in hacking and malwares, which banks need to constantly keep investing to upgrade systems to protect against attacks. Clearly, costs have gone up substantially and will further move up.
Against this backdrop, traditional income sources have become obsolete like demand draft charges, cheque collection charges, pay order charges, non-home branch transaction charges etc. They simply disappeared with online payments coming in.In all, customers have a higher level of service and the convenience of banking improved substantially, while traditional income sources disappeared. Hence in principle, there’s clearly a need to charge some fee for the services rendered to make it a sustainable play for all stakeholders, while it should clearly not be usurious. Some highlights are charges for minimum balance maintenance is linked to the free service, which is bundled with some accounts There are many charges, which are already regulated like MDR on PoS machines etc.
Bank charges aren’t totally an unregulated territory as is made out to be Charges of all banks are invariably available on websites. Communication is not an issue, but the willingness of people to go through them to understand the charges could be an issue If a person comes to the branch to withdraw cash or from our ATMs, there are no charges.
However if he withdraws from other bank ATMs there are charges of `15 plus tax after the 3rd or 5th such withdrawal based on urban/rural location. Similarly, if a cheque is issued by our customer and is presented for clearance, there are no charges while if the customer initiates a NEFT etc there would be some charges. This essentially means that if a customer uses the physical infra then either there are no charges or little charges while if he is using electronic medium there are charges, considering the technology costs involved.