From this year, you would be paying no charges for bank transfers through NEFT (National Electronic Funds Transfer) or RTGS (Real-time Gross Settlement). The Reserve Bank of India (RBI) announced just after its July monetary policy review that processing charges levied on NEFT and RTGS transactions will not apply starting January 2020.
But this news may have come as a surprise for customers who are not aware of the charges banks levy on various services. We list a few such charges.
Cash handling
These are levied by many banks on cash deposits beyond a certain limit of transactions. In most cases, the first few transactions are free.
Typically, the rules are more relaxed for transactions made at your home branch. “Cash handling charges form a significant part of charges levied by the bank. While transacting from your home branch allows you higher limits, you still have to pay charges of ₹50-150 per transaction, if you exceed that limit," said Navin Chandani, chief business officer, BankBazaar.com, an online financial services marketplace.
Fund transfer
While NEFT and RTGS will no longer carry a charge, IMPS (Immediate Payment Service) transactions are still chargeable. The charge depends largely on the amount being transferred and the policy of the bank carrying out the transfer. It’s usually in the range of ₹1 to ₹25.
Lack of minimum balance
Almost all banks insist on maintaining a monthly or quarterly average balance in your savings account. For instance, State Bank of India (SBI) customers holding savings accounts in metros and urban centre branches are required to maintain an average monthly balance of ₹3,000. The requirement drops to ₹2,000 for customers in semi-urban branches and ₹1,000 for rural branches. The bank charges ₹5-15 for non-maintenance of the required account balance. While this seems nominal, some banks can charge as much as ₹200-500.
While maintaining a minimum balance in your bank account might not sound like a challenge, the trouble begins when you have too many bank accounts to keep track of. Think of all the salary accounts opened by different employers. These may cease to be zero balance accounts when you quit your job, and may start accruing a compounding fee as your balance dwindles.
To avoid paying this fee, keep track of your account balance or open accounts that have no such requirement.
ATM, debit card and cheques
According to the RBI mandate, banks are allowed to charge customers for more than five transactions made at ATMs in a month. The charges can vary from ₹8-20 depending on the type of transaction. For instance, SBI allows its regular savings bank account holders eight free transactions, including five at SBI ATMs and three at other banks’ ATMs. In non-metros, such account holders get 10 free transactions, including five at SBI ATMs and five at other banks’ ATMs. The regulator has also stated that banks can’t charge customers for failed transactions.
“If you can’t do without cash, withdraw larger amounts at a time to avoid paying more," said Chandani. Another idea is to take a card for each holder in a joint account. That way the number of free ATM visits would be higher.
If you misplace your card, your bank will charge you a fee of ₹50-500 to replace it. If you forget your ATM PIN, you might also be charged for each time you reset it.
Unfortunately, it’s impossible to avoid paying the charges altogether. “Several of these charges are interlinked. For instance, several banks allow only three to five free transactions even at their own ATMs. Then there will also be additional annual debit card charges to the tune of ₹100-1,500 depending on the card and account type. Even if you want to switch from cash to cheque, you would have to pay for the issuance of a cheque book," said Chandani.
RBI does not allow banks to charge more than ₹150 per cheque for speed clearing of cheques worth over ₹1 lakh; there are no charges for values up to ₹1 lakh. Keep in mind that you will also have to pay a fee of ₹100-150 if your cheque bounces, whether you are the issuer or the depositor. If you give a “stop payment" instruction on a cheque you have already issued, you will again have to pay a fee.
Alerts and instructions
SMS alerts started out as a security feature designed to keep you up to speed about transactions happening from your accounts. This is supposed to help identify cases of fraud immediately. However, the security measure comes at a cost. Banks charge around ₹15 per quarter for SMS alerts.
Standing instructions given to your bank can make life easier, as your EMIs and bill payments happen automatically. But some banks charge a one-time fee for setting up standing instruction and a recurring fee for processing it every time. For instance, SBI charges a one-time fee of ₹50 for setting up a standing instruction.
Documentation
Banks can also charge you for issuing documents. “Banks charge ₹50-150 for issuing duplicate physical passbooks and account statements. However, email statements are not charged," said Chandani. It’s wiser to keep track of your accounts using net banking. If you do need a printed statement, take a printout yourself and get it attested by the bank. But some banks charge for attestation too. For instance, SBI charges ₹150 for signature verification.
If you want to avoid shelling out unnecessary fees and charges, keep track of your accounts and cards, and use chargeable bank services only if you really need them.
