Cost-conscious banks raise fees for paid services

August 19, 2008	(Be the first to rate this story!)  Loading ...
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Banks are raising the charges of fee-based products, including the use of ATM & credit card facility, locker services, demand draft (DD), cheque issue and internet banking facilities, in a bid to keep the bottomline growing. High borrowing costs, coupled with fears of a slowdown, are now beginning to get bankers worried about profitability and growth.

The largest private sector lender ICICI Bank and public sector lender Bank of India (BoI) have already raised the rates for many of these products while others are expected to follow soon. Fees for some of these products have been increased by up to 50%, while many free services will no longer continue to be free any longer.

“We have to raise the charges to keep up with the quality of services we provide,” said an official in ICICI Bank. The rate hikes would be applicable for both — Indian and NRI customers. ICICI Bank has raised charges for issue of cheque books, demand draft and cheque collecting facilities while increasing the penalty for return of cheque due to financial or non-financial (technical) reasons. Also, consumers would now have to pay for irresponsible use of their debit card as ICICI Bank would slap a penalty if there is decline of transaction at any ATM.

The bank will fine Rs 100 from the consumer for de-hotlisting of cards (getting the card unblocked). For premature closure of an account, it will charge a fine of Rs 500 instead of the previous charge of Rs 250. Consumers will also be charged for issue of new user-ID and PIN for internet banking usage.

Bank of India has revised the locker charges also in addition to the charges for other services. “We have revised the service charges with effect from August 14 and the details will be available soon,” Bank of India CMD T Narayanswamy told ET. He, however, said the fees have been raised selectively and not “across the board.”

Commercial banks have been struggling to maintain their profits, owing to recent hikes in key policy rates by RBI. The high cost of borrowing has affected their net interest margins (NIM). Owing to this pressure, most banks reported a single-digit growth in net profit for the first quarter of the current fiscal. The high rate scenario is likely to persist as RBI is unlikely to relax the monetary measures in the near future.

News Published Under:   Banking and Finance |

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