Tag: withdrawal

ATM usage to cost more

Banking & Finance

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The Reserve Bank of India (RBI) has accepted the long-standing demand of banks and White Label ATM operators (WLAO) for a hike in interchange fee in view of increasing cost of ATM deployment and maintenance.

This could encourage deployment of ATMs, which has hit the slow lane in the last one year amid the Covid-19 pandemic.

The interchange fee (which is recovered by banks owning ATMs from card issuing banks for providing) has been upped from ₹15 to ₹17 per financial transaction and from ₹5 to ₹6 per non-financial transaction in all centres. The new fee will be effective from August 1.

Customer charges

Simultaneously, to compensate Banks for the higher interchange fee and given the general escalation in costs, they have been allowed to increase the customer charges for transactions beyond the stipulated free monthly ATM transactions to ₹21 per transaction from ₹20. This increase will be effective from January 1, 2022.

Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. In other bank ATMs they are allowed three transactions in metro centres and five in non-metro centres.

RBI, in a circular, said applicable taxes, if any, will be additionally payable on the interchange fee and customer charges. The central bank added that its instructions also apply, mutatis mutandis (with the necessary changes having been made), to transactions done at Cash Recycler Machines (other than for cash deposit transactions).

ATM additions declined to 2,815 in FY21 against 8,564 in the previous year. The number of ATMs across the country is 2.13 lakh (2.10 lakh.)

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Covid-19: Depositors’ body seeks suspension of penalty on premature FD withdrawal

Banking & Finance

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The All India Bank Depositors’ Association (AIBDA) wants the Reserve Bank of India (RBI) to direct banks to suspend penalty charges on premature withdrawal of Fixed Deposits (FDs) in view of the Covid-19 pandemic.

In its “Addendum to Memorandum to the Reserve Bank of India,” the AIBDA observed that many depositors are under compulsion to prematurely withdrawal their savings to defray the excessive medical bills for treatment of Covid virus and many have lost their jobs.

Hence, the association requested the RBI for a moratorium on penalty charges for premature deposit withdrawal up to ₹5 lakh.

AIBDA underscored that this request is in light of the accommodation given (with respect to moratorium on loan repayments and resolution framework) to small borrowers, MSME loans up to a given limit.

Depositors need relief

“When borrowers are accommodated then why is there no relief for bank depositors – it is unfair and iniquitous.

“This has become of paramount importance in the current pandemic scenario with unemployment, economic uncertainties, health concerns and unexpected expenses,” said DG Kale, President, and Amitha Sehgal, Honorary Secretary, AIBDA.

The association’s office bearers emphasised that many sections of the society depend on FD interest income as a primary source of income.

“It is only in case of extreme necessity/ emergency that a depositor may withdraw the FD prematurely. It is unfortunate that if they need to break the FD receipt, they also have to forego a part of their income as ‘penalty’,” said Kale and Sehgal.

From the long-term perspective, AIBDA urged the RBI to nudge banks to have a more reasonable penalty structure, that is responsive to the current predicament faced by depositors.

The association said while FD rates are currently hovering at around 4 to 5 per cent per annum, the premature withdrawal penalty can be nearly 0.50 to 1 per cent per annum.

Earlier the FD rates used to hover around 7-8.50 per cent. According to AIBDA’s calculation, the penalty of 1 per cent was reducing the return by approximately by 12 per cent (1 per cent divided by 8 per cent).

Currently, FD rates are hovering around 4 to 5 per cent. The penalty of 1 per cent will bring the return down by 20 per cent (1 per cent divided by 5 per cent).

Unfair to depositors

“This is unfair to depositors. In the best interests of retail/ small depositors and in the light of the current falling interest rate scenario, the existing policy related to penalty on premature withdrawal needs a review,” said the AIBDA office bearers.

AIBDA reiterated its concern that retail depositors are likely to be lured by riskier financial assets to improve on the rate of return on their savings.

Against the backdrop of the impending turbulence and uncertainty in the financial market and a likelihood of stress in the banking/ NBFC/ corporate sector, it is important to take care of this risk, it added.

The association emphasised on the need for some calibration in penalty, linking it to absolute percentage return so that retail depositors are able to meet their objective of generating suitable return from this banking product.

It suggested that the penalty may be linked with the value of the FD, with small value FDs having nil or lower penalty structure.

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Distraught depositors want PMC Bank revived soon

Banking & Finance

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Distraught depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank want the Reserve Bank of India (RBI) to speed up revival/reconstruction of the bank as they are in dire need of money to meet exigencies arising from the second wave of the Covid-19 pandemic.

Some of the depositors, especially the elderly, are barely able to get by despite having lakhs and crores of rupees locked up in the bank, as the RBI clamped down on deposit withdrawal since September 24, 2019, capping it at ₹1 lakh per depositor for the entire period that the bank is under Directions.

With RBI extending its Directions against the bank for the fourth time from April 1 to June 30, 2021, depositors are wringing their hands in despair that even after 19 months no solution to their woes is in sight.

RBI extends ‘directions’ against PMC Bank by 3 months

They pointed out that while depositors of other troubled banks such as YES Bank and Lakshmi Vilas Bank were rescued in double-quick time, when it comes to their bank, the rescue process has been drawn out.

Complex process, says RBI

Chander Purswani, President, PMC Depositors’ Forum, said: “The Bank should be revived/ reconstructed on SOS basis…Depositors are losing their lives amid the raging pandemic. These are testing times for all of us. The authorities should have some mercy on us.”

PMC Bank revival: Phased deposit withdrawal likely for customers

In a statement issued on March 26, 2021, the RBI observed that PMC Bank had received binding offers from certain investors for its reconstruction, in response to the Expression of Interest (EOI) floated by the bank in November 2020.

“RBI and PMC Bank are presently engaging with prospective investors in order to secure best possible terms for the depositors and other stakeholders while ensuring long-term viability of the reconstructed entity,” the central bank said.

The RBI also emphasised that given the financial condition of PMC Bank, the process is complex and is likely to take some more time.

Depositors’ angst: tweets say it all

Vasu Chhabria (@vasuchhabria) tweeted: “Reqst PMCBank Reconstruction/Resolution on war footing. Depositors losing lives. Pls don’t punish innocent citizens tax payers.

“Delay is costing lives. 19 months passed 118 depositors dead. What is their fault? It’s their hard earned money…”

Prem Kodnani (@drkodnani) tweeted: “If corona virus symptoms 1: difficult to get tested 2: difficult to get ambulance 3: difficult to get bed 4: difficult to get oxygen 5: difficult to get Remedesivir 6: to get all this, we require money…”

Srikanth Iyer (@SrikanthIyer10) tweeted: “Pls have humanity towards us v r also citizens of India rescue us by merging Pmc Bank with nationalised bank immediately it’s need of the hour…We can’t have access to our own hard-earned money.”

PMC bank was placed under RBI Directions with effect from the close of business on September 23, 2021, due to a huge fraud perpetrated by the promoter of a real estate group and some bank officials.

The Centrum-BharatPe combine is believed to be the front-runner in the race to buy PMC Bank.

As per the EOI floated by PMC Bank in November 2020, subsequent to commencement of the normal day-to-day operations, it will be open for the investor(s) to convert the bank into a Small Finance Bank (SFB) by making an application to RBI, subject to compliance with the RBI guidelines on Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into SFBs.

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