Bengaluru, September 16, 2017

Ramesh (name changed) decided to close his savings bank account in State Bank of India (SBI) and after completing the formalities on Friday, he received an SMS stating Rs 590 has been debited from his account.

A shocked Ramesh asked the staff, only to be told that the bank has been charging for closing savings bank (SB) accounts after the merger of its associate banks from April 1. But when DH reached out to several SBI branch managers in Bengaluru, they were not aware of the new policy. Prior to the merger, SBI was not levying charges to close an account after maintaining it for one year.

In April, SBI tweaked its service charges, pegging the amount required for closing an account at Rs 500 plus service tax, which effectively translated into Rs 573.

After the introduction of GST, the amount has gone up to Rs 590, as banking services attract a tax of 18%.

The SBI’s closure charge is the highest among public sector banks and two and a half times the amount charged by Canara Bank, which is Rs 200 plus GST.

Among the private sector banks, Axis Bank charges the maximum amount at Rs 250. Another Karnataka-based public-sector lender, Syndicate Bank, charges only Rs 100 plus GST for closing an account.

HDFC Bank, Punjab National Bank, Bank of India, Bank of Baroda and Yes Bank do not levy charges. Most of these banks, however, have variable charges if closed within one year, based on age group, geography and gender.

It’s interesting to note that the banking regulator,Reserve Bank of India (RBI),has not defined any rules and regulations on the service charges.

A senior RBI official told DH that there was no need for banks to charge customers for closing an SB account.

An SBI official said it was a commercial decision to discontinue the earlier policy. “With the closure of the account, our relationship with the customer comes to an end. And we have incurred many expenses in that relationship, that would be a loss for us otherwise. To recover that loss we charge the customers,” said Neeraj Vyas,deputy managing
director and chief operating officer of SBI.

Another SBI official, on condition of anonymity, said that the decision to levy exit charges was taken to maintain CASA (current account savings account) ratio of the bank.“I am surprised as to why we are charging customers so much,”the official said.

[The Deccan Herald]