Banks have been defending themselves by arguing that they are providing services to people and like any other service provider, they too have a right to charge for services rendered by them. (Photo: Reuters)

Of course, you have heard the name Vijay Mallya. The liquor baron who once had a majority stake in United Beverages, the face of Kingfisher Airline and Royal Challengers Bangalore, and a host of other things? Aaah! You remember. Good.

Vijay Mallya owes approximately Rs 9,000 crore to various Indian banks. He defrauded them over years and now is in the United Kingdom. India says it wants him to be deported and efforts are on.

Another name that you must have heard of is Nirav Modi. The diamond businessman who defrauded Indian banks to the tune of more than Rs 11,300 crore?

But this is not an article about India’s fugitive billionaires. Forget them for a while. This article is about you and your money.

In less than four years (April 2015 to September 2018), banks in India have earned at least Rs 10,391.43 crore by charging you for just two things--failure to maintain minimum balance in saving accounts and carrying out more than the permitted number of free ATM transactions in a month.

This amount is more than what Vijay Mallya owes, and is 92 per cent of the amount owed by Nirav Modi. Hold on and take a breath because this amount is just the one collected by public sector banks. It doesn't include the earnings made by private banks by collecting fines.

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(Penalty for non-maintenance of minimum balance is much higher in private banks as compared to public-sector banks. For example, between 2015-16 and 2017-18, India’s three private banks Axis Bank, HDFC Bank and ICICI Bank earned Rs 4,054.77 crore by fining their customers for not maintaining minimum balance in their savings account. More on this later.)

In less than four years (April 2015 to September 2018), banks in India have earned at least Rs 10,391.43 crore by charging you for just two things--failure to maintain minimum balance in saving accounts and carrying out more than the permitted number of free ATM transactions in a month.

This information was shared by the Union finance ministry in the Lok Sabha on December 21 in response to a written question submitted by Dibyendu Adhikari, a Trinamool Congress MP.

But why should we compare money owed by frauds with the money that banks have earned legally? Correct. We shouldn't and we aren't. This is just to give you an idea of the enormity of the amount that banks earn by charging customers for just two of their many services.

To better appreciate the size of this amount, let’s take a different example. The amount earned by banks by collecting these two fines is more than the Rs 10,000 crore that the central government approved on Friday (December 28) for India's first man mission to space--Gaganyaan.

Reading the big numbers

Okay. So since now you know that we are talking about big (actually very big) numbers, let’s discuss them in detail.

The central government was asked whether public sector banks levy any charges/fines on saving accounts that do not maintain minimum balance or/and exceed the number of free ATM transactions allowed by banks in a month.

ATM transactions include both financial (withdrawal and transfer) and non-financial (mini statement, pin change, balance inquiry etc).

In its reply, the finance ministry provided data of how much each public sector bank has earned since April 2015 till September 2018 by collecting fines for these two defaults.

Calculating the earnings made by each bank, we find that public sector banks have earned Rs 6,246.44 crore by just charging customers for their failure to maintain minimum balance in their savings account.

Meanwhile, the amount collected as fine for making extra ATM transactions in this period was Rs 4,144.99 crore.

FINE COLLECTED BY TOP 5 PUBLIC BANKS Bank Amount State Bank of India Rs 4,447.75 crore Punjab National Bank Rs 815.94 crore Central Bank of India Rs 551.49 crore Bank of Baroda Rs 510.34 crore Canara Bank Rs 503.35 crore

Source: Lok Sabha

The Punjab and Sindh Bank is the only public sector bank that does not levy any fine for non-maintenance of minimum balance in savings accounts.

The State Bank of India (SBI), which has the largest network in the country and is India’s biggest lender, earned the most (Rs 4,447.75 crore i.e. 43 per cent of the total amount earned by all public banks) by levying fines on these two aspects, the government’s reply revealed.

When it comes to private banks, another reply in the Lok Sabha revealed that between April 2015 and March 2018, three private banks--Axis Bank, HDFC Bank and ICICI Bank--earned Rs 4,054.77 crore by fining customers for non-maintenance of minimum balance.

(We did not include the earnings made by private banks in our overall figure because data of fine collected by them for non-maintenance of minimum balance in the current financial year (up till September) was not available, unlike data for public banks. Besides, the Lok Sabha reply did not include the earnings these banks made by fining customers for extra ATM transactions in past four years.)

The State Bank of India (SBI), which has the largest network in the country and is India’s biggest lender, earned the most (Rs 4,447.75 crore i.e. 43 per cent of the total amount earned by all public banks) by levying fines on these two aspects

However, an analysis of the two replies of the government in the Lok Sabha shows that the earnings made by the three private banks by fining customers for non-maintenance of minimum balance is more than the collective earnings of 20 public sector banks (excluding SBI).

For instance, between April 2015 and March 2018, the three private banks earned Rs 4,054.77 crore by collecting fines for non-maintenance of minimum balance.

In the same period, public sector banks (excluding SBI) earned Rs 2,823.42 crore. For SBI, the earning was Rs 2,433.87 crore in this period.

Private banks' earnings from fine for non-maintenance of min balance Bank Amount Axis Bank Rs 1,300.44 crore HDFC Bank Rs 1,757.90 crore ICICI Bank Rs 996.43 crore Total Rs 4054.77 crore

Source: Lok Sabha

What are RBI’s guidelines

This is not the first time that banks have been criticised for levying fines on customers for failure to maintain minimum balance or for making extra ATM transactions.

Banks have defended themselves by arguing that they are providing services to people and like any other service provider, they too have a right to charge for services rendered by them.

Speaking to news agency Press Trust of India (PTI) on December 21, 2018 SBI’s Managing Director PK Gupta justified the charges levied by banks. He said banks have invested heavily in technological upgradation of system and that this upgradation provides safe and secure banking facilities in the country.

"With substantial investment in infrastructure and technology, it becomes imperative for the bank to recover at least a part of the cost," he was quoted as saying.

As an advice for customers, he said the bank requests them to use digital channels as much as possible "since ATM operations are becoming costlier day-by-day".

The Reserve Bank of India’s (RBI) circulars/guidelines empower banks to self-determine the minimum balance that savings account should maintain and how much fine should be collected for non-maintenance.

With substantial investment in infrastructure and technology, it becomes imperative for the bank to recover at least a part of the cost - PK Gupta, Managing Director, SBI

In regard to ATM transactions, the RBI guidelines say banks should allow their customers to carry out five free transactions from ATMs of home banks every month. For six metropolitan cities--New Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru--the RBI has allowed three free transactions from ATMs of other banks, in addition to the five transactions from ATMs of home bank, every month.

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ATM transactions include both financial (withdrawal and transfer) and non-financial (mini statement, pin change, balance inquiry etc).

The RBI has exempted basic saving bank deposits (BSBD) accounts and accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) from the minimum balance clause. However, these accounts can be fined for extra ATM transactions.

(BSBD accounts and PMJDY accounts are saving accounts that have a cap on the amount that can be transacted from them. They are aimed at providing banking services to low-income groups.)

As already mentioned, the RBI has left it to the banks to decide what will be the minimum balance that a normal savings account should maintain, and also what should be the fine for non-maintenance.

RBI’s guidelines, as per the government’s reply in Parliament, only say that the fine should be "reasonable" and "not out of line with the average cost of providing these services".

For ATM transactions, the RBI leaves it to the banks to decide how much they want to charge for every extra transaction, with the condition that this fine can’t be more than Rs 20 per transaction.

Charges levied by some banks Bank Minimum Balance Required Fine for minimum balance Fine for extra ATM transactions SBI Rs 1,000-Rs 3,000 Rs 5-Rs 15 Rs 20 BoB Rs 500-Rs 1,000 Rs 100-Rs 200 Rs 20 (for financial) Rs 10 (for non-financial) HDFC Rs 2,500-Rs 10,000 Rs 150-Rs 600 Rs 20 (for financial) Rs 8.50 (for non financial) ICICI Rs 1,000-Rs 10,000 Gramin accounts: 5% of shortfall of min balance Other accounts: Rs 100+5% of shortfall of min balance Rs 20 (for financial) Rs 8.50 (for non financial)

How rational is the fine collected by banks

Fines for non-maintenance of minimum amount and extra ATM transactions are just two of the many types of charges that banks levy on customers. Other charges include annual ATM maintenance fee, fee for RTGS, fee for NTFS, free SMS alert, internet banking fee, among others.

Here too, there is no fixed rate for these charges, and they vary from one bank to another.

With a majority of public sector banks running in loss due to piles of non-performing assets (NPA) accumulated over years, are banks trying to find a way out to at least meet their operational costs by charging ordinary customers?

As per another written reply of the central government in the Lok Sabha, the non-performing assets of all public sector banks was worth Rs 9,62,621 crore as on March 31, 2018.

Between March 31, 2014 and March 31, 2018, the non-performing assets of public sector banks saw an increase of 74 per cent from Rs 2,51,054 crore to Rs 9,62,621 crore.

Infographics: Mukesh Rawat/IndiaToday

So, instead of getting their acts in place to find ways to reduce their NPA and ensure that big corporate repay the loan taken by them, are banks fleecing money from ordinary people by charging them for things like non-maintenance of minimum balance and carrying our extra ATM transactions to withdraw their own hard-earned money?

Between March 31, 2014 and March 31, 2018, the non-performing assets of public-sector banks saw an increase of 74 per cent from Rs 2,51,054 crore to Rs 9,62,621 crore.

It’s not rocket science for banks to understand and empathise that the accounts that are not maintaining the minimum amount are not owned by millionaires, but by very ordinary people, many of whom would be positioned in the economy at a place where maintaining the minimum balance is a far cry.The banks are well within their rights to levy fines because the law provides it. But it remains an open-ended question as to how rational and justifiable these charges levied on common people are when juxtaposed to heaps of NPAs which the banks have miserably failed to address.

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