Four months after the government enforced a note ban to crack down on black money and move towards a less-cash economy, top private banks including HDFC Bank, ICICI Bank and Axis Bank have reinstated their charges – a minimum of Rs 150 – on cash transactions above a certain limit.
Given the costs involved in catering to customers at a branch and the fact that customers moving back to cash transactions after remonetisation, bankers want to disincentivise cash services and push consumers into using digital banking.
Bankers are now charging customers who prefer to visit the bank branch regularly to withdraw or deposit cash.
Starting March 1, 2017, HDFC Bank, will charge you a minimum of Rs 150 in case you carry out more than four cash transactions (withdrawals as well as deposits) a month in your home branch.
In the case of Axis Bank and ICICI Bank, the charge has been in effect from early January 2017, when it was re-introduced. While ICICI Bank and HDFC Bank allow the first four transactions to be free, in case of Axis Bank the limit is set at five transactions.
State Bank of India customers are allowed three cash deposits for free and will be charging Rs 50 (plus tax) beyond four transactions, while four cash withdrawals are free and will be charged Rs 5 beyond that.
This may impact a section of customers, expecially senior citizens, who are yet to adapt to the internet banking or uncomfortable using ATMs.
An HDFC Bank spokesperson said, “The charges were there before demonetisation as well. We are just aligning our charges with the other banks. We saw customers taking to digital transactions when pushed into because of demonetisation. Also, the bank allows four free transactions and these days not many people need branches for withdrawals and deposits.”
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Handling cash transactions is a cost to banks, said another banker. The Reserve Bank of India and commercial banks run up a total of Rs 21,000 crore (USD 3.5 billion) in currency operations costs annually.
On an average, a branch banking transaction costs a bank about Rs 40-50 per customer, while an internet or mobile transaction brings down the costs substantially down to Rs 15-20 per customer.
In December, State Bank of India Chairman Arundhati Bhattacharya spoke about finding ways to disincentivise cash transactions, such as imposing a charge or levy above a specified limit or threshold, after normalcy is restored in banking operations.
Bhattacharya also said if India wanted to de-emphasise cash, not only should there be an incentive for people to move towards a cashless economy, but also a disincentive for transacting excessively in cash.
According to an official with one of the above private banks, “In the environment where we are propagating cashless transactions, this is required as customers need to be pushed into using newer and easier avenues of transactions. They are just scared of change and a new concept.”
The ability to do cashless transaction has become easy with internet banking, mobile banking, UPI (United Payments Interface) and wallets building a strong payment ecosystem. These are better and cheaper not just for us banks but for the customers as well, the official added.