New Delhi: The Reserve Bank of India (RBI) wants banks to reduce service charges. These include debit card fees, penalty for not maintaining minimum balance, and late payment fees. This move could provide relief to customers from the high charges levied by banks. This message has been conveyed to banks by RBI recently. However, there has been no official comment from RBI on this.
According to Economic Times, people familiar with the matter, speaking on condition of anonymity, said that RBI officials have told banks in recent weeks that they want to reduce service charges, including those related to debit cards, minimum balance violations, and late payments.
What is the reason for relief from fine?
This move comes after Indian banks have seen a renewed surge in retail lending in recent years. Banks have increasingly focused on retail lending in the past few years following difficulties with corporate lending. Products like personal loans , car loans, and small business loans have boosted banks’ earnings again. However, this pace of growth has also drawn the Reserve Bank of India’s attention.
What will be the limit?
According to experts, the Reserve Bank is particularly monitoring charges that place a disproportionate burden on low-income customers. However, it has not specified a fixed limit or rate, leaving it to banks to decide.
Impact on banks’ earnings
There’s no mandatory limit on the fees charged by banks. According to data from online financial marketplace BankBazaar, processing fees for retail and small commercial loans typically range from 0.5% to 2.5%. Some banks cap the processing fee on home loans at ₹25,000.
According to a report by India Ratings & Research, banks’ fee income increased by 12% to ₹51,060 crore in the first quarter (April-June) of this fiscal year. The increase was only 6% in the previous quarter.
What is the worry?
The central bank is also looking into the disparate fees charged to different customers for the same product. The Indian Banks’ Association (IBA) is also discussing with banks more than 100 retail products that could come under RBI scrutiny.
