Where will charging bank cash transactions lead us?
“What is the robbing of a bank compared to the founding of a bank?” Bertolt Brecht
The quote may look like an exaggeration, but latest developments in banking sector have brought such thoughts to the minds of almost all common folk in India. After the nation withstood the shock and troubles of demonetization, it once again has to bear the brunt of various charges and fines that would be levied by banks from hence forth. Though accepted from some quarters, these charges are seen as a new way of robbing common people of their hard earned money. Everyone would be wishing intensely that on April 1, 2017, SBI, the largest bank in India, wishes ‘April Fool’ to everyone and takes back its following announcement of levying various charges on cash transactions in bank branches -
1. For savings bank account free cash deposits or withdrawals would be limited to just 3. After that SBI will charge Rs 50 plus service tax for every transaction. For current account, the levy could go as high as Rs 20,000.
2. Cash withdrawals will attract a charge of Rs 10 for more than five withdrawals from SBI ATMs itself!
3. SMS alerts will be charged Rs 15 per quarter for accounts holding quarterly balance of Rs 25,000 or less.
Private Banks like HDFC, ICICI, etc. are charging Rs 5 per Rs 1,000 or a minimum of Rs 150, beyond 4 free ones each month for salary as well as savings account.
Its daylight robbery! - The move by SBI to levy charges is seen as important because it has largest number of customers.
- Most of the common folk have their accounts in SBI and major private banks like ICICI, HDFC and Axis. They would be the most affected. Hence this decision is not in their favor at all.
- Most of the people in India are in the middle class and poor category. With their low incomes, paying charges on cash transactions will cause a huge dent to their savings and money management.
- Since people trust banks, charging such high fees is synonymous to robbing people of their hard earned money. It is like making people dependent on banks and then looting them since people will have no other option.
- Choosing in which form to spend the money (cash/card/online), depends on the customer or the person who owns the money. No one, not even the bank nor the government, can decide in which form a person should use his hard earned money.
- It is said that this will improve digitization, but India doesn’t have enough infrastructure currently ready to move away from cash transactions. A country with more than 80% transactions done in cash cannot suddenly reduce it to less than 50%.
- The number of free cash transactions allowed in bank is just 3 to 5 i.e. very less. This is an inconvenience for most of the people, as there are many small businesses which daily deposit or withdraw money/their daily earnings. Most of the small informal businesses do not have a current account.
- General as well as financial illiteracy is the biggest impediment that is going to cause problems as people have no idea of using online facilities or even debit and credit cards.
- Rural folk and elderly citizens who are not much into digital transactions will be affected the most.
- People would now again go back to the old ways of withdrawing all their money except (minimum amount) and keep it in cash with themselves rather than keeping them in bank.
- This will affect the bank deposits in the long term. As money would be kept as cash in the house, bank will have shortage of funds.
- Since not enough infrastructure is available for using cards, etc. people will withdraw all money and this will in turn lead to rise in cash transactions as no party would like to pay the bank for their transactions
- The free ATM transactions in own bank ATMs too have been capped leading to greater inconvenience. This will further lead to more hoarding of cash at home.
A huge stride towards digital future -- It is a very welcome move to charge people on their cash transactions at bank branches. First benefit of this will be development of alternate channels of transactions.
- People will also start moving towards other channels like cheque, cards, online transfers, etc.
- This will not only force the customers to opt for other payment channels but also force the businesses and shops to upgrade their infrastructure and facilities to make available various channels of payment.
- By increase in usage of other ways of payments, transparency increases. Cash is difficult to track.
- Banks require funds to maintain and run bank branches. These charges will help them do so. If people start opting for other channels, banks can even reduce the number of branches thus reducing costs.
- Bank branches are costliest. ATM transactions are 30 times cheaper for the bank than people visiting the branch for the same transaction. Online transactions are cheapest for banks.
- Also, most of the banks are in loss. These charges will help them generate funds that would contribute to pull them out of loss.
The uproar and inconvenience this is going to cause cannot be yet predicted. But negative tones from most of the people need to be addressed properly. No doubt this is a good way to guide people towards more secure and better channels of payments, but the limits prescribed are too steep and high. There should be some gradual change like allowing 10 transactions per month initially and reducing it to 5 per month after a year or so. But overall this will be a good move if measures are taken to reduce inconvenience of people especially the rural folk and elderly citizens.
