Transaction charges have hidden benefits for all

Some of the favourable aspects of the increase in bank charges is welcome, as people are over-using ATMs for frequent withdrawals. This will also propel young educated class resort to cashless transactions, saving a lot of money in printing notes, apart from online transactions being transparent. By far the biggest negative aspect of the charges is that it is not a welcome move in rural 

areas as cash is the mainstay for lower income groups. Also, the charges should be graded and not flat. 

Importance of transaction charges 

Transaction charges are a significant source of income for banks, which supplement the main income from lending. Transaction charges in corporate banking are a significant item which is looked at by all corporate clients while deciding on their primary bankers. 

These cover various services rendered by banks like opening Letter of Credits (LCs), advising receipt of documents discrepancy charges, telex and fax charges, guarantee charges and so on. 

From the bankers side, they look at the total “yield” from a client. This is the total income a bank gets from an account holder for financing (loans and over 

draft) and transaction charges. From a fair view, the transaction charges are representing costs incurred by banks. Each activity involves expending human resource time and also some non financial resource — like tele communication expenses. The schedule of charges is a standard document which the banks issue while a new corporate account is started. 

In the realm of personal banking, the banks actually do more work for less return. Whether it is maintaining branches or clearing small-value cheques or disbursing and issuing cash at the counters, all activities are costing 

the bank with no direct return. Even though it is recognised and acknowledged that it is the savings and deposits of the individual clients which form a major portion of the lending resource, the multitude of transactions is a real burden on a bank. 

ATM usage 

The introduction of requirements like minimum balance is in effect an effort towards getting some benefit for a particular bank, for the effort it is putting in, to maintain an account. 

The introduction of ATMs not only made it easy for the public to withdraw cash and do other simple bank transactions without queueing at the counters, it also reduced the load on the banks substantially. With linking of ATM across banks and by streamlining the clearing process, a major portion of the load on the banks has been reduced.

ATM usage has been possible not only in one’s host bank but also at the ATMS of any networked bank. This has been a huge comfort to the public who do not have to carry large amounts of cash while travelling across the country. 

Usage of ATMS of banks other than the host bank has attracted some charges beyond a certain number in a month. Here again, it is not unusual for banks to categorise customers in terms of their importance to the bank and reduce or nullify some of the charges. This was a tool used by private banks effectively to develop a clientele of high-net-worth individuals. 

However, customers have a right to feel peeved at the transaction charges as an unnecessary burden.