Bank charges you may not know about

ANAND KALYANARAMAN :B L :20 Feb 2013

Bank portals carry a list of all their charges. Being in the know can help you minimise these.

Banks levy a plethora of charges on their savings bank account customers. Common charges include those for taking demand drafts, for not maintaining minimum balance in the account, and for online fund transfers. But there are many other costs which may catch you unawares.

To be fair, banks disclose what they charge customers for and how much - the Reserve Bank of India mandates them to. Banks have to put this up on their Web sites.

It’s a laundry list which you will be better off reading and knowing about, saving you the surprise of unexpected costs. But in the meanwhile, here’s a heads-up on some of the more unusual bank charges on regular bank accounts.

BANK VISITS

Do you remember the number of times you’ve visited your bank this month? It might be wise to keep tabs on this number. Many banks these days dissuade customers from conducting transactions at branches.

This they do by charging such transactions beyond a specified number based on the customer’s average monthly balance. HDFC Bank, for example, charges Rs 75 per non-cash transaction and Rs 100 per cash transaction at the branches beyond a certain number.

To reduce the number of branch visits by customers, banks have been pushing net banking, direct debits/credits, and widening the scope of transactions you make at the ATM. But note that standing instructions to debit your account carry charges too. You have to pay both for setting up a standing instruction and for each transaction. For instance, SBI charges Rs 51 for setting one up and Rs 25 for processing it. Rejection of a standing instruction can also dent your bank balance.

As far as ATM usage goes, try to restrict access at machines other than those of your issuing bank. The first five transactions each month at other ATMs are usually free but are charged thereafter. ICICI Bank, for instance, charges from the sixth transaction onwards at the rate of Rs 20 for cash withdrawals and Rs 8.5 for non-financial transactions. Say you check your balance and then withdraw cash. Even if you’ve done this in one visit, it will be counted as two transactions.

Many banks also charge for ATM card replacement in case of loss and pin regeneration in case you forget it.

OTHER REQUESTS

Requests beyond the usual monthly or quarterly account statements entail costs. For example, Royal Bank of Scotland (RBS) charges Rs 100 for duplicate and ad-hoc statements. Checking your bank account online may save you this cost. Similarly, many banks charge customers for duplicate pass-books and old records. Also, email/SMS alert services could cost you. RBS charges Rs 25 per month for this service.

If you need your bank to attest your photo or signature, or confirm your address too, be ready to pay. HDFC Bank charges Rs 100 per instance for the former, and Rs 50 for the latter.

RELATED TO ACCOUNTS

Close accounts you don’t use, as banks often levy charges on those which are dormant. For instance, Karnataka Bank charges Rs 50 per year on a dormant account. This may seem like a small amount, but a rupee saved is a rupee earned. The charges you pay can amount to a lot over the years, especially if you have multiple accounts you don’t use often.

Having said that, don’t close your account within months of opening one. ICICI Bank, for example, charges Rs 500 for accounts closed between one month and one year from the date of account opening.

CHEQUE TRANSACTIONS

Cheques returned without being paid - whether deposited or issued by you – will entail a cost. Citibank, for example, charges Rs 350 per instrument if a cheque you issue returns unpaid, and Rs 100 per instrument if a cheque you deposit returns unpaid.

So it is worth the effort to sign consistently, mention correct dates, maintain sufficient balance, and ask persons to whom you give post dated cheques not to deposit them before the due dates. Unfortunately, there is little you can do if a cheque you receive returns unpaid.

Similarly, an instruction to the bank to not pay a cheque after issuing it will cost you. Axis Bank charges Rs 100 per instrument, and Rs 200 for a series of instruments.

Requesting chequebooks beyond the allowed quota also carries charges. ICICI Bank, for instance, issues 30 cheque leaves free every quarter. Every additional cheque book will cost you Rs 30.

If the recent RBI proposal to dissuade bank customers from using cheque books takes shape, then expect to pay more on this front.

Besides the above, many other transactions such as international usage of your debit card, hotlisting and de-hotlisting of a debit card, and return of couriers sent by the bank due to wrong address may add to your cost. Be in the know and try to minimise these charges.

anand.k@thehindu.co.in

R.C. Mishra is Chief IT Commissioner

 BL :CHENNAI, FEB. 19:2013  

Ramesh Chandra Mishra has taken over charge as the Chief Commissioner of Income-tax, Chennai – I and Cadre Controlling Authority for the Tamil Nadu and Puducherry region.

According to a press release, Mishra belongs to 1979 batch of the Indian Revenue Service and has served in various cities, including Mumbai, Hyderabad, Bhubaneswar and Chennai – in all the wings of the department.

A post-graduate in International Politics, his area of specialisation is tax administration, with a special interest in investigation.

ICICI Bank to discontinue Kingfisher co-branded credit card

B L :PTI :NEW DELHI, FEB 20:  

2013

ICICI Bank has decided to discontinue its co-branded credit card with Kingfisher Airlines in the wake of the continued grounding of the debt-laden air carrier.

“ICICI Bank and Kingfisher Airlines’ co-branded credit card programme has been discontinued due to discontinuation of Kingfisher Airlines services,” the bank said in a communication to its customers.

“As a result, the ICICI Bank Kingfisher Airlines Credit Card will be valid till March 31, 2013,” it said, while asking card users to opt for another credit card from the bank.

The bank further said it would issue an ‘ICICI Bank Platinum Visa Credit Card’ to users of the ICICI-Kingfisher card without any annual fees from March 15 onwards with the same interest rate and credit limit as that on the existing card.

The customers would, however, be free to opt for any other card available with the bank in line with their requirements.

ICICI Bank used to be a major lender for the ailing airline, but later sold off its entire Kingfisher debt of Rs 430 crore loans to a debt fund managed by SREI Infra Finance in July 2012.

Engulfed in a major crisis involving huge debts of over Rs 7,500 crore and non-payment of staff salaries, Kingfisher Airlines had to ground its services last year and the carrier is still struggling to revive its operations.

The airline has never posted a full-year profit and it has accumulated losses of about Rs 8,000 crore.

A host of lenders, including public sector giant SBI, recently decided to start the process of recalling their loans to Kingfisher after months of discussions with the airline management for recovery of their debt and revival of the carrier’s flight operations failed to yield desired results.

Portable ATMs gain popularity among banks

B S :Somasroy Chakraborty  |  Kolkata  February 20, 2013 Last Updated at 00:41 IST

Religious gatherings in the country appear to have offered banks an opportunity to increase transaction volumes in their automated teller machines (ATMs). Private sector banks have started introducing mobile ATMs that are migrating from one religious fair to another throughout the year.

HDFC Bank, the second largest private lender in the country, has sent its mobile ATM to the Maha Kumbh Mela in Allahabad this year. It is estimated over 100 million people will attend this year's Maha Kumbh Mela, which began last month.

"This is the first time we have sent a mobile ATM to Kumbh. It was impossible to rent space and set up our ATM there. The transaction volumes have been phenomenal," said Birendra Sahu, senior executive vice-president for direct banking channels and premier banking at HDFC Bank.

Kerala-based Federal Bank stationed a couple of portable ATMs near Sabarimala temple during the last festival season when thousands of devotees visited the place. "Mobile ATMs have high utilisation rate. You can move the ATMs from these places when there is no festival and footfalls are low," said Shyam Srinivasan, managing director and chief executive of Federal Bank.

Typically, a mobile ATM is put on a van that moves from one location to another. When the money in the ATM gets exhausted, the nearest cash-in-transit agency of the bank deposits additional funds in the machine. 

However, a few banks are still reluctant to introduce portable ATMs because of its maintenance cost. Bankers estimate that the maintenance cost of mobile ATMs is at least 25-30 per cent more than that of traditional ATMs. "The bank has to incur expenses for the upkeep of the ATM as well as the van. It also has to ensure that there is adequate security," a senior executive with a large private bank said.

But many bankers believe the transaction volumes in portable ATMs mitigate the high maintenance cost in the long-run. "It’s a function of the volume. 

These ATMs attract very high footfalls. So, in the long-run if you consider the utilisation rate, such ATMs are not expensive at all," HDFC Bank's Sahu said.

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Trade unions on strike: India may lose Rs 20,000 cr

Press Trust of India  |  New Delhi  February 20, 2013 Last Updated at 11:43 IST

The nation-wide strike call has been given by United Forum of Bank Unions
Major trade unions on Wednesday began a two-day strike, as the beleaguered government prepares to present an austerity budget to parliament and weather a corruption scandal in a big arms deal.

Financial services, mining and transport are likely to be affected by the strike, called by all major trade unions to protest high inflation, a fuel price increase and what they say are violations of labour laws.

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Trade union leader killed in clash

PTI adds: In Ambala, a trade union leader, who was squatting along with a group of workers near the local bus depot as part of the two-day nationwide strike call, today died when he was hit by a bus in his bid to stop it from plying, a senior Roadways official said here.

"The incident took place around 4 am this morning when Narender Singh, a bus driver by profession, tried to stop the vehicle which was being taken out from the Ambala Depot despite the strike," district president, Haryana Roadways Workers Union's, Inder Singh Bhadana said.

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Prime Minister Manmohan Singh, grappling with the country's worst economic slowdown in a decade, asked the unions to call off the strike, but talks between a ministerial panel and union leaders broke down on Monday.

"As far as we have seen, the government has nothing to offer to labourers," said Atridev Tiwari, general secretary of Bharatiya Mazdoor Sangh (Indian Workers Union), one of the main unions leading the strike.

"It doesn't matter what the Prime Minister says now because we cannot rely on his word. He says something and does something else."

The Associated Chambers of Commerce and Industry said the two-day strike was expected to cause an estimated loss of Rs 150 billion-200 billion, hurting sectors such as banking, insurance and transport.

Narsing Rao, the head of state-owned Coal India Limited, which accounts for about 80% of India's coal, said output losses this week could touch 4 million tonne pushing the company further away from its production target of 464 million tonne in this fiscal year through March.

"The strike is totally uncalled for and will be destructive," said Chandrajit Banerjee, director general of the Confederation of Indian Industries.

Parliament's budget session begins on Thursday.

The finance minister plans to cut the public spending target for fiscal 2013/14 by up to 10% from this year's original target, in what would be the most austere budget in recent history as he tries to avert a sovereign credit downgrade.

The session is also likely to be disrupted by opposition protests over a $750 million deal for AgustaWestland helicopters that the defence ministry is threatening to cancel over allegations of kickbacks.

The opposition Bharatiya Janata Party has said the Prime Minister's offer of a debate on the deal is not sufficient, but has not specified how it will respond.

The last two sessions of Parliament were badly disrupted by opposition protests and little business was conducted.

Normal banking operations were hit today as employees of public sector banks went on a two-day strike in response to a call given by central trade unions to press for wage hike in the backdrop of rising inflation.

The nation-wide strike call has been given by United Forum of Bank Unions (UFBU), consisting of nine national level unions, including AIBEA, NCBE, BEFI, INBEF, NOBW and AIBOC.

Apprehending disruption in their normal banking operations, many banks had already informed their customers about the proposed strike.

Meanwhile, sources said, banks have taken steps to ensure that public do not face problems at least on the cash front during the strike period.     

Banks have fed additional cash in ATMs to meet the cash needs of their customers.

Bank unions are pressing for early wage revision of employees, which they said is due from November 2012. They are also opposing banking sector reforms and any plan for merger of banks.

There are 26 public sector banks with employees strength of around 10 lakh.

In December 2012 also, four bank unions went on strike opposing amendments carried out in Banking Regulation Act and Banking Companies Act, enabling foreign equity in public sector banks.

The bank strike is part of a general strike call given by 11 central trade unions including Indian National Trade Union Congress (INTUC), All India Trade Union Congress (AITUC), Bharatiya Mazdoor Sangh (BMS), Centre of Indian Trade Unions (CITU) and All India United Trade Union Centre.

Budget 2013 :Govt FY14 borrowing likely Rs 4,90,000 crore: Goldman Sachs

Moneycontrol :Wed, Feb 20, 2013 at 10:15

Borkerage house Goldman Sachs estimates that the government could borrow Rs 4.9 lakh crore in 2013-14 to finance the fiscal deficit. It also expects the Reserve Bank of India to do open market operations (OMOs) of about Rs 1 lakh crore to meet government demand and keep bond yields steady.

Borkerage house Goldman Sachs estimates that the government could borrow Rs 4.9 lakh crore in 2013-14 to finance the fiscal deficit. It also expects the Reserve Bank of India to do open market operations (OMOs) of about Rs 1 lakh crore to meet government demand and keep bond yields steady.

"In FY14, we expect the government to have a net borrowing requirement of Rs 4.9 trillion (Rs 4.9 lakh crore).We expect banks to continue to provide a major chunk of the demand, due to our expectation of private sector credit demand remaining muted in the first half of FY14, before gradually picking up," the Goldman Sachs note to clients said.

"We assume that an additional USD 5 billion will be auctioned to FIIs. In our view, domestic retail will likely continue to invest in government bonds due to expectations of lower interest rates. Yet, the RBI may need to do about Rs1 trillion ( Rs 1 lakh crore) in OMOs to meet government demand and anchor bond yields. Given inflation gradually coming off, we think there will be less reluctance for the RBI to do so," the note said.

Reader’s Digest parent company files for bankruptcy again

A Reader’s Digest magazine in this file photo. AFP

FP :Feb 19, 2013

The owner of magazine Reader’s Digest, once the staple of doctors’ offices and coffee tables, has filed for bankruptcy for the second time in less than four years, citing a greater-than-expected decline of the media industry.

RDA Holding Co and more than two dozen affiliates filed for a pre-negotiated Chapter 11 bankruptcy plan the company says will allow it to reduce its $534 million debt load by 80 percent, according to documents filed Sunday in US Bankruptcy court in the Southern District of New York.

Its international operations are not part of the filing.

It is the second time the company filed for bankruptcy protection since 2009.

Despite emerging from bankruptcy as a smaller company in 2010, “its business plan and financial forecasts did not adequately account for the steep declines that the media industry has suffered over the last few years – as evidenced by Houghton Mifflin Harcourt Publishing Company’s recent return to Chapter 11,” Robert Guth, the company’s president and chief executive officer, said in court documents.

Nor did the company’s plan “adequately reflect the fragility of RDA’s wide-reaching international footprint,” Guth said.

Under the terms of the restructuring plan, $464.4 million of its senior notes will convert to equity, leaving the company with $100 million in debt.

Wells Fargo & Co and holders of its senior secured notes have agreed to $105 million in debtor-in-possession financing to allow the company to continue operating under bankruptcy. The company plans to exit bankruptcy within four months, court documents say.

DeWitt Wallace and his wife Lila Acheson Wallace founded Reader’s Digest in 1922. The magazine offered readers stripped-down versions of articles about health, home and family from other publications. It eventually began the best-selling consumer magazine in the United States. Today it operates print and digital magazines, books, music and videos worldwide and has more than $1.1 billion in assets, according to court documents.

Distressed-debt investor Alden Global Capital and hedge fund Point Lobos Capital LLC are listed as among the company’s largest stakeholders, according to the filing. Luxor Capital Group, as administrative agent for a $10 million loan, is listed as one of its largest unsecured creditors.

Reuters

Premji follows Buffett, Gates to become first Indian to sign Giving Pledge

 FP Staff : Feb 20, 2013

Wipro’s Azim Premji is following in the footsteps of Warren Buffet and Bill Gates to become the first Indian to  dedicate a majority of his wealth to philanthropy by signing up for the Giving Pledge.

The billionaire founder of the IT company is scaling up  efforts to improve the quality of the education system in India through the Azim Premji Foundation.

The Giving Pledge was formed in 2010 to encourage the wealthiest in the US to give a part of their wealth towards philanthropic activities. However, Buffett now wants to widen the group’s function outside the US to India and China.

In a letter for the first international “Giving Pledge” conference, founded by Bill Gates and Warren Buffet, Premji said his Foundation currently has 800 people spread across India working in some of the poorest regions of the country. “The Foundation plans to scale up to 4,000-5,000 people over the next five years.”

According to a release from the Giving Pledge, 12 new pledge signatories joined the cause, including Premji, Hasso Plattner and Vladimir Potanin, bringing the total to 105 families committed to the pledge, which is collectively worth $500 billion.Richard Branson is also one of the 12 overseas signatories.

Premji has donated 8.7 percent of the total stock of Wipro from his personal stock for philanthropy in 2010, which formed the endowment for this foundation. Currently, Premji is the third-richest Indian as his wealth is estimated to be about Rs 87,000 crore.

“The developments of the past two years have given me confidence in our scaled up and institutional strategy. Even as we execute this strategy, I am aware that ensuring stable funding source is critical for its success. I am committed to transferring more of my wealth to scale up the Endowment of the Foundation,” he said in a statement to the Economic Times.

In 1966 Premji dropped out from his studies at Stanford due to his father’s sudden death (though he completed his Engineering degree in 2000) and came back to India to run the small family business.

“As Wipro became a globally successful IT Services firm, I began to seriously consider what I should do with my wealth, which had accrued from the success and market capitalisation of the company”, Premji said.

“I became convinced that markets, public systems and philanthropic initiatives all had a significant role to play if the country was to have inclusive development, and that we needed to work purposefully towards establishing a more humane, equitable and ethical society for all our citizens,” he added.

It was this purpose that made him decide he must focus his philanthropic initiative on trying to help improve the Public Education System in India, beginning with primary schools, for he strongly believed education is perhaps the most important social institution to empower individuals and shape a better society.

Premji said in 2009, they reviewed the experience and strategy at the Foundation and decided to scale up work and deepen support to the public schooling system by creating institutions, including those at district and state-level which work on capacity development of teachers and other people in the public education system, and also on other related academic and managerial issues.

With inputs from PTI

RGESS is flawed in its construction. It should be scrapped

Live Mint :Tue, Feb 19 2013. 07 16 PM IST

For the average investor there is a huge entry barrier in terms of paperwork.

Mint, along with Bloomberg TV India, brings a new personal finance show called Smart Money. The weekly call-in show is hosted by Vivek Law, editor, Bloomberg TV India. Monika Halan, editor, Mint Money is the expert who takes viewers’ questions and debates issues around personal finance news and products. Edited transcript of the show that was aired over the weekend on Bloomberg TV.

Vivek: Monika, will the Rajiv Gandhi equity saving scheme (RGESS) really work?

Monika: First of all, it is difficult to enter the product as it is very complicated. Then, there are exit options that are complicated. And finally, after you jump through all the hoops, you get a maximum benefit of Rs.5,000, which is just a one-time benefit. It is completely not worth it, according to me.

Vivek: The scheme clearly says that you need to have a demat account and that it is not applicable to anyone who has done any transaction till now. Could you elaborate a bit on difficulty to enter?

Monika: Right, you need a demat account and it should be the first investment that you will make. There is a whole list of attested documents that you need to produce. You need to do your know-your-client verification as well as an in-person verification. You have a whole list of paperwork, which is just a prelude to entering the product. You also need to sign a declaration stating that your income is less thanRs.10 lakh a year. An average investor would find it easier to buy a gold coin. Hence, there is a huge entry barrier in terms of paperwork.

Vivek: We heard the finance minister say recently that in this budget he will try and make some changes. What should be done to make this an attractive scheme?

I have a radical solution. Scrap it. It’s a very sad scheme in terms of design. There is a three-year lock-in and after the first year of lock-in, you can churn your money in the next two years in case there is an emergency and you need funds. Now, equity is a long-term product and you invest for at least five years. And the scheme has a provision for churning for short term needs! Therefore, in its very construction, I see flaws.

The only way it will do well is through incentives. A lot of mutual funds (MFs) are pushing new fund offers. Again, I am going to say that it doesn’t work for you, especially in the smaller towns. We know the incentives are larger in MFs in the 15-plus metro cities. There is a lot of distributor pressure on that.

What the finance minister could do is make the equity-linked savings scheme (ELSS), the route through which people participate in equity markets. Direct participation is not a good idea. It has to be through equity linked products like MF. Or even the National Pension Scheme (NPS).

Vivek: Now let’s talk about the best ways to go about your financial planning. We all see that closer to March people start buying just about any product. In principle, how would you advise people to look at tax planning?

Monika: The financial products that you choose have to suit your situation and your particular problem. You have to look at it as a strategy rather than just tax planning.

Look at the products in the 80C basket and look at what you want. The first thing to look at is protection. If you are the main breadwinner and you need life insurance, then you should look at a life cover that is not just worth Rs.1 lakh at a high premium. For a 30-year-old, look at premiums of around Rs.8,000-8,500 a year for a life cover worth Rs.1 crore. For a 40-year-old, the premium amount would be between Rs.30,000 and Rs.35,000 a year. We need to look at what is that we are buying.

Vivek: Are you saying that you should first look at a financial plan and then fit in products to suit the plan rather than the other way round, which is what most of us end up doing? For example, you made the point about protection. If you go and buy an insurance product, you get a cover as well as tax benefit. Your second step would probably be to look at investment, where if you need to be in equities then you could pick up ELSS.

Monika: Yes. If you want long-term products with zero risks, then there is the Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF). These are government guaranteed products. You get exempt-exempt-exempt or EEE tax status on both. The rates of return are very good because they are tax happy. If you want to take a little bit of risk and you still want long term, then there is ELSS and NPS. The NPS is a long-term corpus building product launched by the government.

If you want medium-term products, look at five-year fixed deposits (FDs) and the National Savings Certificate. These, too, come under the 80C basket. From the point of view of a senior citizen, you don’t want corpus building, but income generation. Here, too, FD is a good option so is the Senior Citizens’ Saving Scheme, which gives a quarterly or an annual income.

Vivek: Avinash Panda is joining us from Mumbai. He is a young professional with a sizeable income but has no investments as of now.

Panda: I am 26 years old and work as a marketing manager for a bank. My annual salary is Rs.8.78 lakh and my in-hand salary per month is Rs.54,000. I have taken a bike loan for which I pay an equated monthly instalment (EMI) of Rs.2,300. I save Rs.40,000 a year through the provident fund. Right now, I have not invested anywhere due to which I am paying a lot of tax. I plan to buy a house for which I will take a loan of Rs.26 lakh and its EMI will be around Rs.23,000. Should I save the money right now rather than going for a loan and wait for a better time to buy the house?

Vivek: Monika, what is your advice for Avinash?

Monika: Looking at the money that Avinash has, I think before he starts off on the EMI, he should do some basic things. He should start off by creating an emergency fund. He should have at least three to four months of his living cost and his loan amount in an FD. It doesn’t cost too much to break an FD. It really makes a difference if you have an emergency fund in case something bad happens in your career. At 26, I would also start thinking about buying a life cover. You have till about 30 years of age to get a very cheap long-term cover. You should get a 30-year term plan. PPF is the first account that you should now open. I think you can easily put in Rs.50,000-60,000 a year in it. After this, I don’t see too much money left. The simple rule of thumb is this 30% of your income can go as EMI. When you have that extra money, you can go for that loan.

Write to mintmoney@livemint.com OR sms at 9773270010. Type SM, give a space, and write your query.

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