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.

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

RBI to Banks: Alert customers in high value cheque payments

To clamp down on cheque-related fraud cases, the Reserve Bank of India (RBI) on Wednesday asked banks to alert account holders by a phone call and contact the base branch in case of non-home cheques before clearing high value payments.

The RBI also asked banks to send an SMS alert to payer/drawer when cheques are received for clearing and examine cheques under UV lamp for clearance beyond Rs 2 lakh.

The central bank further said multi-level checking should be done before clearing cheques above Rs 5 lakh.

“Banks may consider the following preventive measures for dealing with suspicious or large value cheques: Alerting the customer by a phone call and getting the confirmation from the payer/drawer and contacting base branch in case of non-home cheques,” RBI said in a communication to banks.

The RBI said directions have been issued in the wake of a rise in the number of cheque-related fraud cases. It said cases have been reported where even though original cheques were in the custody of account holders cheques in the same series were presented and encashed by fraudsters.

The RBI said banks may resort to given directions selectively, if not feasible to be implemented systematically.

It further asked banks to take appropriate precautionary measures to ensure that the confidential information are neither compromised nor misused either from the bank or from the vendors’ side.

“Due care and secure handling is also to be exercised in the movement of cheques from the time they are tendered over the counters or dropped in the collection boxes by customers.”

Besides, it also asked banks to ensure usage of CTS-2010 compliant cheques, strengthen infrastructure for cheque handling, KYC compliancy, close monitoring of credits and debits in newly opened accounts.

The central bank said such frauds could have been avoided had due diligence been observed at the time of handling or processing of the cheques.

“Banks are, therefore, advised to review and strengthen the controls in the cheque presenting/passing and account monitoring processes and to ensure that all procedural guidelines including preventive measures are followed meticulously by the dealing staff,” RBI said.

Source: Business Today