ChequeMan Blog

Levy of penal charges on non-maintenance of minimum balances in savings bank accounts

The RBI has issued a notification in which it has allowed banks to levy penalty charges for non-maintenance of minimum balance in savings bank account but the banks shall also adhere to the additional guidelines given in Annex (given above). These guidelines come into effect from April 1, 2015.

The issued notification has been given below:

RBI/2014-15/308

DBR.Dir.BC.No.47/13.03.00/2014 – 15                                     November 20, 2014

All Scheduled Commercial Banks

(Excluding RRBs)

Dear Sir/Madam

Levy of penal charges on non-maintenance of minimum balances in savings bank accounts.

Please refer to our circular DBOD.Dir.BC.53/13.10.00/2002-03 dated December 26, 2002 on ‘Minimum Balance in Savings Bank Accounts’ advising banks to inform customers, in a transparent manner, regarding the requirement of minimum balance in savings bank account and levy of penal charges for non-maintenance of the same at the time of opening the account.

2. In this connection, a reference is invited to paragraph 30 of Part B of First Bi-monthly Monetary Policy Statement, 2014-15 announced on April 1, 2014, regarding ‘Developmental and Regulatory Policies’ proposing certain measures towards consumer protection. One of the proposals contained therein was that banks should not take undue advantage of customer difficulty or inattention. Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to Basic Savings Bank Deposit Accounts and restore the services when the balances improve to the minimum required level. A reference is also invited to the recommendations of Damodaran Committee on customer service in banks which, inter-alia, recommended that ‘banks should inform the customer immediately on the balance in the account breaching minimum balance and the applicable penal charges for not maintaining the balance by SMS/Email/letter. Further, the penal charges levied should be in proportion to the shortfall observed’.

3. The policy announcement has been reviewed after extensive consultation with banks. Consequent to these deliberations and after taking into consideration the recommendation of Damodaran Committee, it has been decided that while levying charges for non-maintenance of minimum balance in savings bank account, banks shall adhere to the additional guidelines given in Annex.(given above) The guidelines come into effect from April 1, 2015.

4. These guidelines should be brought to the notice of all customers apart from being disclosed on the bank’s website.

5. In the meantime, all banks are advised to take immediate steps to update customer information so as to facilitate sending alerts through electronic modes (SMSs/emails etc) for effective implementation of the guidelines.

Yours faithfully

(Lily Vadera)
Chief General Manager

Annex

Levy of charges for non-maintenance of minimum balance in savings bank account shall be subject to the following additional guidelines:

(i) In the event of a default in maintenance of minimum balance/average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS/ email/ letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

(ii) In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.

(iii) The policy on penal charges to be so levied may be decided with the approval of Board of the bank.

(iv) The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.

(v) It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

(vi) It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

Click here to download the notification.

Basic concepts about Cheques

A cheque is a document that orders a bank to pay money from an account. Technically, a cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified transactional account held in the drawer’s name with that institution. Both the drawer and payee may be natural persons or legal entities.

How can you use a cheque?

• Paying money: you can pay anyone with a cheque, so long as they choose to accept it. Some businesses have decided not to accept cheques because there’s a bit of risk involved if the cheque bounces. The Cheque Card Guarantee Scheme – which used to offer retailers protection – was withdrawn in June 2011.

• Accepting money: if someone wants to pay you with a cheque, think carefully before you accept it. You should only accept cheques from people you trust, because if it turns out that the cheque is a fake, or the person doesn’t have enough money to pay it, it might be difficult to get hold of the money.

Cheque writing basics

Writing cheques is simple and safe, as long as you:

• Write the name of the person or organisation you’re paying.

• Draw a line through any blank spaces on the cheque so people can’t add extra numbers or names, and

• Add details (such as a reference or account number) to the payee line after you’ve written the name of the company if the cheque is written to an organisation, bank or building society. This makes sure the money ends up in the right place.

When does the money leave your account?

• When you write a cheque, the money won’t leave your account until the person you give it to pays it into their bank or building society account. Cheques do not have an expiration date but it is common practice to reject a cheque presented for payment bearing a date more than 6 months earlier. This is at the bank or building society’s discretion.

• Make sure you have enough money in your account to cover the value of the cheque until the person has paid it in and the money has been deducted.

• The money usually leaves your account three working days after the person pays in your cheque.

• If you pay a cheque into your account, you’ll be able to use the money four working days later – but you won’t be sure the cheque has cleared (the money is really yours) until six working days after you’ve paid it in. If you use the money in the meantime, you may have to pay it back.

Bank accounts not inoperative if dividend cheque credited in two years

The Reserve Bank said bank accounts will not become inoperative if a dividend cheque has been credited in it in the previous two years.

“Since dividend on shares is credited to savings bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction.

“As such, the account should be treated as operative account as long as the dividend is credited to the Savings Bank account,” RBI said in a notification.

A bank account become inoperative or dormant if no credit or debit transaction has been conducted for a period of two years.

RBI further said that such, the account should be treated as operative account as long as the dividend is credited to the Savings Bank account.

This clarification has been issued in view of the doubts raised by some bankers whether an account in which only dividend has been credited can be treated as inoperative after two years.

Source: The Economic Times