Given how much of urban India is now familiar with transacting on electronic channels, the uproar over the proposed hike in charges for cash deposits and withdrawals beyond a limit, is surprising. What is inexplicable is the government’s request—or perhaps diktat—to State Bank of India (SBI) to reconsider the planned increases in charges relating to cash transactions since one of the objectives of demonetisation, you would think, was to discourage the use of too much cash and move to digital payments that can be tracked. If the costs of depositing/withdrawing cash are going to be on a par with those for digital payments, why would people move away from cash and use NEFT, IMPS or UPI? In the case of SBI, asking savings account holders to pay a fee of R50 plus service tax if they deposit cash more than three times in a month is not being unreasonable since few customers, apart from daily-wagers need to deposit cash more often in a savings account. Customers must appreciate that all services have a cost attached to them and that banks are running a business; installing and running an ATM machine is an expensive proposition, as is transporting cash across the country, maintaining a bank branch and issuing cheque books to customers.
The minimum balance, in fact, is related to this. SBI is asking customers to maintain a minimum average balance of R5,000 in the six metros, and levying a fee between R50 and R100 plus service tax if they fail to do so. The current minimum of R1,000 with cheque book facilities is fairly low; the cost of servicing a savings account—apart from the 4% interest rate—works out to R80-100 per month and has to be recovered from customers. The graded minimum balance requirement of R3,000 and R2,000 for urban and semi-urban branches, respectively, does not seem high either—with a per capita income of over R1 lakh a year, the minimum account balances seem reasonable; SBI has already clarified that the minimum balances don’t apply to Jan-Dhan accounts that the poor have.
In the case of private banks like HDFC Bank, the R2 lakh limit below which no fees will be charged for cash deposits/withdrawals is quite generous. The distinction between the ‘home’ branch and the ‘non-home’ branch (the limit for free transactions halves for non-home branches) is odd since, in any case, the spread of ‘core’ banking meant consumers could treat any branch across the city/country as a ‘home’ branch when it came to withdrawals/deposits —customers have to be allowed to withdraw/deposit cash at any branch that suits them, subject to the R2 lakh cap for free transactions. While private sector banks—HDFC Bank, Axis Bank and ICICI Bank—are allowing just four free cash transactions and are charging a minimum of R150 for a transaction beyond that, this appears stiff. Clearly, the banks are not afraid of losing customers, but scaling up the charges gradually, as society gets used to less cash, would be a more considerate way to do it.