Passbooks to increase pvt, foreign bank costs

Private and foreign banks are unnerved by the Reserve Bank of India's directive to issue passbooks or account statements every month to all customers as they see a 'substantial' increase in expenses.

The banking regulator has stated that banks should not pass on the cost of providing passbooks or monthly statements to customers.

Unlike public sector banks, which still continue with the age-old practice of issuing passbooks to every customer, private and foreign banks do not issue passbooks, but provide account statements every quarter.

Customers are charged anywhere between Rs 100 and Rs 250 by these banks if a customer seeks monthly statements.

Bankers, not wanting to be quoted, said passbooks are not something they would like to handle given the costs involved and sending monthly statements is a redundant exercise involving "huge" expense.

According to industry estimates, the cost per transaction at bank branches ranges from Rs 40 to Rs 55 and, hence, these banks rule out getting back to the passbook culture.

A senior private sector banker said the cost of sending one statement is Rs 12-Rs 15. If banks have to send statements every month, then the expenditure will increase three-fold to Rs 154-Rs 180 from Rs 48-Rs 60 per customer, which wipes out the gain on an account where the minimum balance of Rs 5,000 is just maintained.

Banks have a 3 per cent margin (of Rs 150) on every account that just maintains Rs 5,000 minimum balance. But this gain fades considering the facilities provided by banks.

Maintaining ATMs and air-conditioned branches involves huge cost. The cost per transaction ranges from Rs 18-Rs 24 at ATMs and Rs 40-Rs 55 at branches.

RBI, in a circular, has asked banks to "invariably" offer passbook facility to all its savings bank account holders and the banks must issue monthly statement of accounts, in case the bank offers the facility of sending a statement of account and the customer chooses to get the statement.

"Customers have constant access to their account statements through the mini statement facility of ATMs, internet banking and 24 hour phone banking. Issuing a monthly statement then becomes quite redundant," a private sector banker said and also pointed out that all customers do not have monthly transactions and do not need or even ask for monthly statements.

According to the retail head of a foreign bank, "We will inform our customers that they can avail of monthly statements through our phone banking service or at our branches. If a customer requests that he/she wants monthly statements, then we will do that."