When last week in a newspaper I read the RBI dictate “No late fees on credit card dues for a month”, I thought of writing this article as on number of occasions  during my over 30 years service in PS Banks,  and even afterwards, I have been wondering why RBI has to come to the rescue of general public on such issues.  

I feel that whenever such  a dictate is  issued by RBI, the policy makers in banks ( Public Sector as well as more Private Sector banks ), must put their head in shame that  Indian banking Regulator has to come to the rescue of general public, put an end the policies of banks which are NOT customer friendly.  Similarly the Chairman of IBA and Chief Executives  of IBA also need to feel ashamed as they failed in their duty  to meet the objectives for which IBA was established.   Let me explain why I feel  they need to be accountable in this respect.    

We come across frequently RBI guidelines where they issue new dictates to reign in the anti public policies,  which regulator views as to be for fleecing the customers.  Question arises who are the people responsible for bring such policies in the realm of banking circles.   Are those people are so insensitive and dumb that they can not read the pulse of the general public ?   If they are so, how come they have reached up the ladder so high ?

My experience is that usually such policies are initiated by Private Sector banks, but soon copied by Public Sector banks.    We all know that there exists a class of sycophants in PSBs, who are always looking for some new trends for copying.   Thus when such policies are introduced by Private Sector banks and these come to the knowledge of such sycophants, they immediately start the process of introducing the same in PSBs too, and try to take credit for so called "innovative ideas".    These sycophants will come out with comprehensive note to CMDs / EDs / GMs claiming these to be innovative ideas in the industry which will help in  increasing income of the banks.  Then they push through such policies.   The worst part is that most of PSB’s CMDs / EDs / GMs who are in the habit of encouraging sycophants,  accept these anti-customer suggestions without applying their own mind.    Once some PS Banks have implemented these,  even other reluctant banks cave in due to peer bank pressure and high profiled sycophants.

We have seen RBI has issued guidelines, thereby stopping banks  for charging for Not Maintaining Minimum Balance in SF Accounts,  Pre-Payment Penalty on Housing, Auto loans,  High Late Payment Fees on Credit Cards etc etc. 

Now question arises whether regulator has to waste his time in reigning banks for immoral or anti-customer policies of banks ?   Should RBI's job be not  focused on much higher level of policy making concerning the country’s economy.   However, top bank bosses force RBI to stoop to this level for micro management, purely due to anti-customer attitude of such bankers.

Is IBA merely a place for parking retired bankers / benefits to serving bankers,  so that they can have easy life as they are in good books of GoI or have the right connections in Government ?  Do they not have any responsibility towards bank customers?  Can  IBA absolve itself of all the responsibilities by claiming that it being a private body (funded by banks !) considers itself above law and claims to be out of RTI Act?  It seems to be responsible to nobody as GoI or RBI too have hardly ever taken to task the IBA for not working towards their defined objectives.  

Whenever, RBI comes with dictates like stopping usurious charges for maintaining minimum balances or banning the pre-payment penalty on loans or credit card late fee payments, it is actually a castigation on banks in general and IBA in particular.  Does IBA not feel that such immoral charges actually damage the good public image of banking as a service industry?   If it feels so, then what action it has taken to stop banks from charging fees which have to be banned by RBI ? If they feel that banks were right, then why IBA has not the guts to protest against RBI dictates.  I am of the firm view, RBI must censure IBA for being mute spectator to such fleecing of customers by banks.  Who should compensate customers who have already been charged such immoral fees / charges / interest ?  We expect Automakers to recall the vehicles in case any deficiency is found at a later stage, but Bank management in India are above the law and nobody ever even thinks of refunding of such charges after RBI has declared these to be wrong.  Is this called Good Governess ?

I know some common bankers, top management, IBA may not agree with my strong views.   In such a situation, rather than cursing me for these views, they should have the guts to protest against RBI for issuing such dictates.  I wonder what would have happened to common customer if we did not have a customer friendly regulator.  Let these people, but I will speak what I feel to be correct.

Let me now discuss the long term impact of such policies of banks on the reputation of banks and common bankers.  Such rules may have been introduced by banks with good intentions to generate additional revenue and punish some defaulters.   However, when even a single customer has to pay (Rs 500 to Rs 1000) for unintended withdrawal from SF account or delay in credit card payments, he quotes this to 10 of his friends about the immoral and arrogant attitude of banks. Thus, the image of bank and bankers gets a big hit and you start losing public sympathy.   Thus policies should be such that these are NOT  penal in nature for honest customers or who make intended slips / delays in payment or withdrawal.  Banks can always  charge a small higher interest (say instead of 12%, let them charge 14%) but not penal fee / interest.   IBA and top management needs to understand difference between penalty and gentle reminder to follow the rules.

The golden rule while framing such policies is that “you should try to imagine the feelings of a person who is earning say Rs 15,000 per month (for the whole family) but forgets to deposit his dues by two or three days, and bank decides to charge Rs 1000 for the default”.   We know our Electricity Boards, BSNL / MTNL too charge for delays, but it is nominal amount of Rs 50 or so.  Thus, nobody makes a hue and cry as it is a gentle reminder to be careful in future, but banks have tried to fleece through penalties.