Financial Accountability Network India (FAN India) welcomes the announcement of State Bank of India (SBI) to waive the penalty for not maintaining Average Minimum Balance and for SMS service.
In 2017, SBI imposed penalty on minimum balance and other banks followed the same, resulting in heavy financial burden for the students, labourers, farmers, MGNREGA workers, pensioners, people dependent on social welfare schemes, contract labourers, street vendors and others.
The Banks were forced to levy the penalty and pass on the financial burden to the depositors due to a number of policies/steps taken by the government. Large number of Jan Dhan accounts that the BJP government forced banks to open and maintain has greatly increased the operational costs of banks. The fact that over half these accounts have little or no balance and are by and large non-operational has negatively impacted the bank profits.
Demonetisation, which nearly killed the informal sector and the Indian economy is yet to recover from that jolt, had also impacted the banks heavily. Delegitimizing over 86% of the currency in circulation forced large sections of the people to deposit their unbanked savings and exchange new currency for old. Banks and bank employees worked overtime exchanging notes, accepting deposits and refilling ATMs in efforts to soften the blow on working people. These efforts cost banks dearly in operational costs.
Further, the BJP government has also forced the banks, especially PSBs, to help in implementing a variety of other government schemes. These include the Aadhaar registration and bank account linking process, and the highly criticised crop insurance scheme among others, all of which have increased the operational costs of banks.
In September 2017, the Managing Director of SBI said that SBI was planning to raise Rs 2000 crore as a penalty for non-compliance of minimum balance in saving accounts, part of which would be used to compensate the extra costs incurred to banks due to linking of 40 crore savings accounts to Aadhaar.
Replying to a question in the Parliament the government said that banks (21 PSBs and 3 Private Banks) have collected Rs. 12,388.56 Crore by penalising the customers for not maintaining minimum balance in their saving accounts from April 2014 – September 2018.
Just in four banks – SBI, PNB, UCO bank and Bank of Maharashtra – 33.8 lakh Jan Dhan accounts are converted into savings bank accounts. A good number of them are charged for banking services.
The penalty collected by SBI for not maintaining minimum balance between April-November 2017 was Rs. 1771 crore, which exceeded SBI’s profit for the quarter of July-September 2017, which was Rs. 1,581 crores.
The bank charges were a direct assault on the poor by the banks to socialise losses made by big business. The write-off of bad loans since 2014 is Rs. 7.8 lakh crores. Even then the total impaired assets is at Rs. 16.9 lakh crores and the outstanding non performing assets are Rs. 9 lakh crore.
It was in this context that people’s movements, trade unions, civil society organisations and concerned citizens launched the No Bank Charges campaign in 2018. The campaign held a number of programs – street corner meetings, photo exhibitions, public meetings, protest actions, online campaign etc demanding the banks to withdraw the charges which hurt the poor the most.
Shaktiman Ghosh, General Secretary of the National Hawkers Federation who were at the forefront of the campaign said, “We fought against various bank charges levied by the banks since the poor are the worst affected. Particularly the urban poor and unorganized workers who are forced into the banking system had to bear the burnt. We are happy that SBI withdrew the penalty on minimum balance. We hope other banks will do the same soon.”
Trade unions of the bank employees and officers had demanded withdrawal of bank charges. All nine bank unions under the United Forum of Bank Unions (UFBU), including the All India Bank Officers Confederation (AIBOC), the All India Bank Employees Association (AIBEA) during their protests in December 2019 against mergers and reforms had also demanded withdrawal of bank changes.
Thomas Franco, former General Secretary of All India Bank Officers’ Confederation said, “Though late the decision of SBI is welcome. Other banks should follow. With a large population of poor, the charges for the poor and middle class should be waived and the same can be realised from the rich. Banking is an essential service which should be free for the people.”
While waiving the minimum balance penalty has give some respite to the depositors, slashing of interest rates on savings bank deposits, which was announced along with the waiver, has it’s own implications. “SBI SB Deposits are around 11 lac cr. Slashing of interest by 0.25% amounts to around 2,800 cr. This amount matches with amount, which SBI is infusing in YES Bank to bailout, which offers 6% interest on SB Deposits. This amount is more than what SBI used to collect by way of minimum balance charges” said Devidas Tuljapurkar, Joint General Secretary of All India Bank Employees Association.
Banking is a service to the citizens and it cannot be run merely on profit motive, even putting the depositors, in particular the poor, in distress. Penalty on minimum balance is only one of the many charges the banks levy on its depositors. “We hope SBI will waive other charges as well, which hurt the poor the most, and other banks will follow the suit. The campaign will continue until these charges are withdrawn,” said Joe Athialy, Centre for Financial Accountability.
FAN India demands that all charges, which are a burden to the common people, should be withdrawn at the earliest. The government should desist from burdening the banks with additional non-banking tasks and interfere in banking services, rather, empower them to take stern action against wilful defaulters and recover the loans. SBI and other banks should return the depositors the penalty on minimum charges collected so far.
The need of the hour is to strengthen the public sector banks and making the regulatory mechanisms independent and robust.