A Myth called ‘Any Branch Banking’ - Service Charge Discrimination : Misrepresentation of Monetary Policy Regulatory Stance

Abstract

The term “Inter-sol charges” has been used frequently by banks and off late by Reserve Bank of India (RBI). The word ‘sol’ means branch. Thus intersol charges mean inter-branch charges. These are charges levied by banks for using service of branches other than the home branch where a customer originally opened his account. With prevalence of core banking solution (CBS), when a customer opens an account at a bank branch, he becomes a customer of the bank and not of the branch. In the CBS environment, the account resides in a central server at a location different from where it is opened. Though it is superficially ‘tagged’ to the parent or home branch it can be operated from any branch of the bank with equal ease. In fact, if CBS is not functioning, no transaction can be carried out in the account either in the parent branch or any other branch. This is the concept of ‘Any Branch Banking’. However, banks on lines similar to toll imposed on newly constructed bridges / roads, devised means to charge toll by interpreting intersol charges as charges for using CBS to get a service at a non-home branch, thereby attempting to rationally differentiate charges at home and non-home locations for a banking service. Incidentally, banks never reasoned (and rightly so) intersol charges as attributable to handling charges– be it, non-home cash handling; non-home cheque handling; non-home passbook handling; non-home customer handling, etc. RBI through its July 1, 2013 notification directed banks not to impose any intersol charges (or toll). However, the same notification suggested that banks can impose a peculiar toll in the name of cash handling charge (when customers deposit cash into or withdraw cash out of their bank accounts, even if amount involved is small) at a non-home branch while equivalent charges do not exist at the home branch. Getting a cue from the notification, State Bank of India now charges their customers Rs. 50 for every non-home cash deposit, even when the deposit amount is small (say, in the range of Rs. 10 to Rs. 1000). Thus the RBI notification has induced banks to introduce intersol charges for cash handling, discriminating home and non-home charges, in breach of the spirit of its own Monetary Policy Statement of May 3, 2013. Though there is nothing wrong with the concept of cash handling charges, such a notion exists for bulk cash handling and not for small amount cash. Furthermore, a differentiation between home / non-home is implicitly intersol differentiation. In other words, imposition of cash handling charges makes sense so long as the charges are reasonable and that such a charge is made reasonably uniform across home and non-home branches. The action points to address these and related issues are as under.