The haughty banks of India – Jagdish Rattanani & R.K. Pattnaik

Banks in India suffer from an attitudinal problem of hostility towards the common man. … Why should depositors pay a penalty for withdrawing their own money? – J.R. & R.K.P.

The late Savak Tarpore, regarded by many as one of the greatest central bankers of India, once put on an old, torn shirt and walked into a bank branch in South Mumbai to check for himself the quality of service offered across bank counters. Years later, he recounted the experience to one of the writers—he was virtually pushed out, threatened with physical assault and warned never to enter the branch again. The experience led Tarapore, who was the deputy governor of the Reserve Bank of India in the 1990s, to argue forcefully that banks in India suffer from an attitudinal problem of hostility towards the common man.

It is this very attitudinal problem that is on display in the move by several banks to charge fees and penalties for transactions that exceed a specified number. Various depositor associations are meeting to find out how they can oppose what essentially (and admittedly) are penalties—the precise term used by the State Bank of India (SBI)—on depositors withdrawing or depositing their own money at a place and time of their choosing.

The charges will be levied on transactions beyond four or five free withdrawals/deposit transactions every month, and many banks seemed to have simultaneously warmed up to the idea and want to implement it beginning April 1. What this presents is a picture of banks standing together in conflict with ordinary citizens, an image that hardly does credit either to the banking system, particularly the large PSU banks, or the government, so soon after all the hardships caused by demonetisation.

It is quite likely that the levies will be watered down or even withdrawn, at least by the public sector banks, with reports that the government has asked the leader of the pack, the SBI, to reconsider the move. But the proposals themselves, the way they have been presented and the justification offered for these fees by the bank CEOs give some interesting insights into the alternate universe in which the sector leaders appear to live and operate. The words, the terminology, the explanations and the language in general reflect the inner contempt with which ordinary depositors are held by the banking world.

One of the reasons proffered for levying charges to discourage customers from interfacing with banks and their teller machines is the simple one that banks are not charities and that they must seek a return for their shareholders and recover their costs, forgetting the elementary fact that the money being so described here is not the banks money at all.

In fact, the very existence of the bank depends on the trust of depositors who are the reason why the bank is business. It is pertinent to bring to the attention of our bank leaders the simple statement made by the late M. R. Pai of the All India Bank Depositors Association—that it is depositors who are the real owners of the banks, as without depositors, there would be no banks. In India, household sector deposits made by individuals, businessmen, traders, professionals, trusts, self-help groups The words, the terminology, the explanations and the language in general reflect the inner contempt with which ordinary depositors are held by the banking world, etc. account for more than 60 per cent of the total deposits with banks.

In sum, the bulk of the money of the people of India provides the fuel for the banking industry to exist and run. Of these, many would have deposit balances beyond the Rs 25,000 required to escape (in the case of SBI) withdrawal penalties from SBI ATMs. But an even larger number of accounts will be of those who maintain less than this balance. This makes the poorest and the most vulnerable who probably have only hesitantly adopted banks, liable to pay penalties for withdrawing or depositing repeatedly. “We do not see there is a requirement for a household person to withdraw cash through ATMs for more than four times,” the SBI chairperson has been quoted as saying. – The New Indian Express, 15 March 2017

» Jagdish Rattanani is Editor at SPJIMR, R. K. Pattnaik is Professor at SPJIMR, Mumbai.