When Will Banks Stop Fleecing Us?
On February 16, 2025 By newsroom Topic: India Money Advice
1. Rising Charges on Basic Banking Services
- Banks increasingly charge for formerly free services, such as deposits and withdrawals after a set limit.
- Customers face frequent and arbitrary increases in fees, often with little explanation.
- These charges disproportionately hurt regular depositors while benefiting the bank’s bottom line.
2. Issues with Home Loan Rates
- Banks:
- Quickly raise interest rates for floating-rate home loans when rates rise.
- Delay passing on rate reductions unless customers request resets, often charging hefty fees for the same.
- Unfair Treatment:
- Existing customers often receive worse rates compared to new borrowers.
- Lack of awareness among borrowers leads to significant financial losses over time.
3. Mis-Selling of Products
- Banks push unsuitable third-party products (e.g., insurance) on unsuspecting customers.
- Customers often lack recourse due to weak grievance redress systems.
4. Weak Regulatory Oversight
- Reserve Bank of India (RBI):
- Introduced the Charter of Customer Rights in 2014, focusing on:
- Fair treatment
- Transparency
- Honest dealing
- Privacy
- Grievance redress
- However, the charter remains toothless due to the absence of enforceable timeframes, penalties, or compensation mechanisms.
- Digital Payments Liability: Despite a 2016 draft circular to limit customer liability in fraud cases, formal regulations remain absent.
5. Exploiting Depositors
- Savings and current accounts are highly profitable for banks, with spreads of 6-7%—among the highest globally.
- Customers are charged for basic services like withdrawing their own money, which is rare in other countries.
6. Public Reaction and Advocacy
- A petition on Change.org, signed by over 214,000 individuals, demands RBI action against unfair banking practices.
- Advocacy groups and experts (e.g., Moneylife Foundation, AIBEA) have raised these issues with the RBI.
- Upcoming #BankSeBachao Tweet Morcha aims to pressure the government and RBI to intervene.
7. Recommendations
- Transparent Pricing: Banks must justify charges with detailed cost breakdowns.
- Customer-Friendly Practices: Automatically adjust interest rates and strengthen redress systems.
- Regulatory Enforcement: RBI must enforce its Charter of Customer Rights and hold banks accountable for mis-selling and unfair charges.
Summing it up
Banks must prioritize fair treatment of depositors, transparent pricing, and efficient grievance redress. The growing public anger and collective advocacy efforts, like the #tweetmorcha, could catalyze much-needed reforms.
