RBI Issues Circular On Levying Unfair Interest Charges On Customers

Mohit was working at the office when he received a message about  deduction of 250 rupees from his account. He had 1000 rupees in his account, and 250 rupees were deducted. Mohit got worried and went to the bank for inquiry. He found out that because average monthly balance was not maintained, the bank had applied the charges. Mohit realized that this wasn’t told to him when he had opened the account. A person standing beside him asked, “whether  he had read the form while opening the account!” Mohit replied, “No.”

Like Mohit, most people only fill in details and sign when opening an account. They consider reading the form’s terms and conditions a hassle. However, this is completely wrong. When you open an account, you should read the terms mentioned in the form. Today, we’ll talk about such terms and conditions.

The most crucial step while opening a bank account is choosing the right bank. Your goal should be to save your money while earning maximum interest. Therefore, it’s essential to keep an eye on banks that offer good interest rates. Smaller banks often offer higher interest on savings accounts compared to larger banks. For example, SBI savings account provides 2.70% annual interest on balances of up to 10 crore rupees. On the other hand, RBL Bank offers 4.25% for deposits of up to 1 lakh rupees, 5.50% for 1 to 10 lakh rupees, 6% on balance of 10 lakh to 25 lakh rupees, and 7.50% for 25 lakh to 2 crore rupees. Typically, major banks offer around 7% interest on fixed deposits.

Some savings accounts do not require you to maintain a balance, these are known as zero balance accounts. Many savings accounts have a minimum balance requirement known as Average Monthly Balance (AMB) or Quarterly Monthly Balance (QMB). This is mentioned in the Terms and Conditions section of the account opening form. If you do not maintain the minimum balance in a savings account, the bank will levy a penalty, as happened with Mohit.

Apart from penalties for not maintaining the minimum balance, banks also levy various other charges. These include overdraft fees, ATM fees, message alert fees, charges for duplicate passbook, charges for issuing chequebooks, fees for default made on loan payments and even on instances of  cheque bounce. While filling out the bank account form by signing the declaration, you authorize the bank to collect all these charges.

When opening a bank account, you are always asked to mention the nominee. Many people don’t take it seriously. In the case of a nominee, the account holder assigns a person’s name who can claim the deposited money after his death. In  absence of a nominee, claiming the funds involves a long and complex legal process. There are no charges levied for adding the nominee’s name for the first time while opening the account. If you change nomination details later on the bank may levy charges.

While opening the account, you may have to fill additional forms. These are declarations for Foreign Accounts Tax Compliance Act, Common Reporting Standards (CRS), and Central KYC. By signing these forms, you authorize the bank to share your private, tax-related, and financial information with the government agencies. This means government agencies can obtain your private information from the bank whenever they want. Information about your transactions from your bank account can also reach governmental departments.

Like Mohit, most people don’t pay attention to these details when opening a bank account. Make sure that you read your account opening form. It provides comprehensive information about the services and charges that will be levied by the bank. You can visit the banks’ websites to get information about various charges, penalties, and paperwork. Insurance coverage is also available on bank deposits. Up to 5 lakh rupees of your deposit are secured in case the bank faces any financial troubles.