Tuesday, 7 May 2013

Banks Cannot Change Minimum Balance Requirement Without Advance Notice to Customers

It is often observed that banks open new deposit (savings / current) accounts by promising very low minimum balance requirements. Then, after sometime, the minimum balance requirement is changed without informing the customers. Only when the bank starts charging a penalty for non-maintenance of the increased minimum balance requirement, the customer comes to know that he or she is now required to maintain a higher minimum balance in the account. Banks often take the plea that the change in the minimum balance requirement was either notified in their policy through their website or the circular regarding new minimum balance was pasted on some board in the branch. Such conduct of banks leads to customer dissatisfaction and complaints. Some banks change the minimum balance requirement from quarterly basis (QAB) to monthly basis (MAB) without informing their customers. Reserve Bank of India, in its Master Circular on Customer Service in Banks Ref. No.: RBI/2012-13/50 dated July 2, 2012 has made advance notice to  customers mandatory for banks before making any change in the minimum balance requirement. Read details below...

According to para 5.4 of the master circular, "at the time of opening the accounts, banks should inform their customers in a transparent manner the requirement of maintaining minimum balance and levying of charges, etc., if the minimum balance is not maintained. Any charge levied subsequently should be transparently made known to all depositors in advance with one month’s notice. The banks should inform, at least one month in advance, the existing account holders of any change in the prescribed minimum balance and the charges that may be levied if the prescribed minimum balance is not maintained". Reserve Bank of India is, however, silent on the manner in which banks should inform customers. For example, a bank may update the policy of minimum balance requirement on their website or may just post a letter on the notice board in a branch instead of informing customers individually. You are welcome to express your opinion on this aspect in the comments form below.

Basic Banking No-frills Account

As per para 4.1 of the master circular, to promote financial inclusion in the country, all banks should make available a basic banking 'no-frills' account either with 'nil' or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transactions in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks should also give wide publicity to the facility of such a 'no-frills' account including on their web sites indicating the facilities and charges in a transparent manner.




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All information given in this blog is obtained from sources in the public domain, RTI applications, discussions with bankers, bank customers in India and also with some employees of Reserve Bank of India having knowledge of the working of various Offices of Banking Ombudsman in India. All information in this blog is presented on a best effort basis and is not claimed to be complete information on any of the subjects covered in this blog. Use of any information given in this blog is purely voluntary on the part of the readers. Author of this blog does not assume any responsibility for any action of the readers related to any matter discussed in this blog or any consequences thereof. Readers of this blog are advised to consult a legal practitioner before taking any action related to any matter discussed in this blog.